(Corrects title of Saxo’s Charu Chanana to chief investment strategist from head of currency strategy)
(Reuters) – Reuters reported on Wednesday that China is considering allowing the yuan to weaken in 2025 to brace for higher trade tariffs in a second Donald Trump presidency, citing people familiar with the matter.
Foreign exchange markets moved on the news, with the yuan falling about 0.3% to 7.2803 per dollar and China-sensitive currencies such as the South Korean won and New Zealand dollar slipping.
The Australian dollar, which sometimes serves as a more actively traded proxy for the yuan, fell as much as 0.6% to a one-year low.
Here are comments from market analysts and participants:
JANE FOLEY, HEAD OF FX STRATEGY, RABOBANK, LONDON:
“It is a very interesting report, because it would fit with the theme of a slowing Chinese economy, and theme of ‘what is China going to do to push back against U.S. tariffs?’ Weakening the exchange rate, given that sort of backdrop, does have a very appealing logic to it.
And we know, of course, that politically, particularly if China does want to increase the reserve status of the renminbi, there is pressure on it to keep it firmer. But if they need to revitalise the economy, and they tend to be more interested on focusing on exports, there is quite a compelling logic that they may allow the renminbi to soften.”
NICHOLAS REES, SENIOR FX MARKET ANALYST, MONEX, LONDON:
“News that China will allow the yuan to weaken as they prepare for Trump tariffs does not come as a shock – this has been one of our high-conviction calls post-election day.
