The Chinese yuan weakened almost 1% against the US dollar on Thursday to hit its lowest level in a year. How low can the currency go?
China’s currency is plunging again. But how low will it go?
The yuan weakened almost 1% against the US dollar on Thursday to hit its lowest level in a year. It has now fallen by nearly 8% over the past three months amid a global trade spat and concerns over an economic slowdown in China.
Analysts said the yuan’s latest dip came after China’s central bank indicated that it was willing to accept a weaker currency.
A sliding currency could help China’s huge export industry cope with new US tariffs, as it makes Chinese products cheaper for buyers who pay in dollars. That could in turn boost an economy that posted its slowest growth rate in nearly two years — 6.7% — in the second quarter.
Unlike the dollar or euro, the yuan does not float freely against other currencies. Instead, China’s central bank helps guide the currency by setting a daily trading range. On Thursday, it surprised investors by guiding the yuan lower.
Ken Cheung, a currency analyst at investment bank Mizuho, said the move implied that the central bank would tolerate a weaker currency in order to support the economy.
There could be costs, however.
