THE Chinese yuan fell to its lowest level against the dollar since August 2010 in morning trading yesterday, fuelling speculation that Beijing is allowing currency depreciation to counter threatened US tariffs.
US President Donald Trump reacted angrily later in the day, accusing China of deliberately and improperly weakening its currency.
“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation’. Are you listening Federal Reserve?” he said on Twitter, calling the change “a major violation” which would “greatly weaken China”.
Near 1335 GMT, the offshore currency weakened to 7.1114 to the dollar – the worst since 2010 – days after Trump announced a plan to impose fresh tariffs on another US$300 billion (RM1.26 billion) in Chinese goods, sharpening trade war tensions between the world’s two biggest economies.
The onshore yuan also tumbled, hitting 7.0536 yesterday morning trade to reach its lowest level since 2008.
Both the onshore and offshore yuan breached the 7.0 level against the dollar, which investors see as a key threshold in currency value.
Trump has frequently accused China of artificially depreciating its currency in order to support its exports – charges long denied by Beijing.
So far the US Treasury Department has not formally accused China of currency manipulation either.
Trump jolted global stock markets last week when he announced more tariffs just a day after US and Chinese trade negotiators had completed their first face-to-face meetings since both sides declared a truce in June.
The extra 10% duties Trump plans to implement from September 1 would mean he has now targeted virtually all of the roughly US$550 billion in goods the US buys from China every year.
Global equity markets were in selloff mode yesterday, with major indices in Asia, Europe and the US down 2% or more.
China on Friday threatened to retaliate to any new US tariff – it has already imposed its own duties on US$110 billion in American goods, almost all of the American products it imports.
A report from Bloomberg News said China has also asked its state-owned enterprises to stop buying US farm goods, in a further sign of escalating tensions.
The yuan is not freely convertible and the government limits its movement against the US dollar to a 2% range on either side of a central parity rate which the People’s Bank of China (PBOC) sets each day to reflect market trends and control volatility.
The daily central rate was at 6.9225 per dollar yesterday, 0.33% weaker from Friday.