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Trump Victory Drives Chinese Yuan to Six-Year Low

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The Chinese currency hit its lowest mark in six years on Thursday, as investors reacted to the impact they perceive the Trump win will have on bilateral trade. The dollar traded at 6.8 yuan, the lowest level it has been since September 2016. Altogether, the yuan has fallen by 4.5 percent against the dollar this year, which is a repeat performance of last year. Donald Trump had made it clear during his campaign that he was against the trade with China, claiming it was detrimental to local producers and that the country had been using its exchange rate to manipulate the US. The fall in yuan appears to be in support of his theory, though the reasons for the drop are unrelated. The US Dollar has surged in recent months against other currencies, over speculation of a fed rate hike. Meanwhile, the Chinese economy continues to face its mounting problems.

It is estimated that more than $540 billion have left the shores of China this year, which is 10 percent more than the same period last year, based on research by the Institute of International Finance. China is spending hundreds of billions of dollars to keep its currency up, thus depleting its foreign currency reserve to a five-year low. The yuan is expected to continue sliding against the dollar. Trump asserted that a tariff of up to 45 percent on Chinese imports would be one way to solve the problem. A trade war with the US wouldn’t be beneficial to either party, but the risk remains. “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 labelling China a currency manipulator.”

 

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