October 17, 2019

Yuan stabilizes but tensions with the US remain high

Beijing: China stabilized the RMB exchange rate on Tuesday, indicating that China can suspend the depreciation of the renminbi as a way of responding to US tariffs on Chinese products.

The RMB exchange rate against the US dollar fell to 7.0562, and then rose again to 7.0297 in the afternoon. Just a day earlier, Beijing allowed the yuan to fall to a minimum of 11 years, which caused the financial market to collapse. The depreciation of the renminbi can help neutralize US tariffs on Chinese products, making them more competitive in price in the international market.

The Trump administration officially announced on Monday that China incorrectly manipulated the value of the renminbi. In the process of combating Beijing’s trade surplus and technology policy, in addition to the increase in tariffs imposed on Chinese products, this also opened up new possible sanctions.

Seeing that the two main economies of the world have fallen into an economic dispute of an eye for an eye has shaken investors. Therefore, China’s monetary stability offer on Tuesday provides some hope that the two sides can try to avoid further escalation. The US stock market has recovered sharply since Monday.

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