The Chinese Yuan hits 6 years low versus U.S. Dollar and other Forex currencies after Trump won the US election 2016, ForexSQ experts team conducted all about the China Yuan drop against other Foreign exchange currencies after US presidential election.
China Forex Falls
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China’s currency sank to a six-year low against the U.S. dollar on Thursday as investors weighed what a Donald Trump presidency could mean for trade between the world’s two largest economies.
On the campaign trail, Trump talked tough about China, accusing it of “raping” the U.S. through trade and manipulating its currency, the yuan.
“The underlying threat of protectionism from the new U.S. administration will weigh negatively on trade-focused currencies in Asia like the yuan,” said Stephen Innes, a senior trader at online broker Oanda.
One dollar now buys around 6.8 yuan, the weakest the Chinese currency has been since September 2010. It’s fallen around 4.5% against the dollar so far this year after dropping a similar amount in 2015.
On the face of it, the weakening yuan may seem to support Trump’s accusations that Beijing is manipulating the currency to make its exports cheaper and more competitive. But China has in fact been waging an expensive war to stop the yuan from falling too fast too quickly. It’s desperate to avoid a repeat of the sharp drops that panicked markets in August 2015 and January 2016.
China spends billions to support yuan
Beijing has burned through hundreds of billions of dollars since last year in efforts to prop up the yuan. Its foreign currency war chest, while still ample, has shrunk to its lowest level in five years.
A big factor in the yuan’s recent decline has been the strengthening dollar, bolstered by expectations of a rate hike by the U.S. Federal Reserve next month. But China has its own problems, too, including slowing growth, an overheating property market and huge sums of money pouring out of the country.
Money still fleeing the country
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More than $540 billion has flowed out of China so far this year, nearly 10% higher than during the same period in 2015, according to estimates from the Institute of International Finance.
Experts believe those pressures will persist — and they expect the yuan will continue to slip lower against the dollar.
A major question is whether Trump will follow through with his threats against China. He’s talked of slapping tariffs of as much as 45% on Chinese goods, a move that experts warn could trigger a trade war.
“A more conciliatory tone in his victory speech has raised hopes that he will back away from his most extreme campaign pledges,” Capital Economics said in a research note. “Nonetheless, it remains possible that Trump will push for higher tariffs on Chinese goods and we expect a Trump presidency will waste little time in labeling China a currency manipulator.” ForexSQ use CNN as source.