Yuan's Plunge Sparks Economic Concerns Amid Trade Tensions

The Chinese yuan has hit a 14-month low, with stock and bond markets also struggling amid economic concerns and potential trade tensions as Donald Trump's presidency begins. Despite measures to boost the economy, investors remain wary, expecting further volatility until China's March policy announcements.

The Chinese yuan has reached a 14-month low, reflecting mounting anxiety over China's economic outlook as trade tensions loom with the commencement of Donald Trump's presidency. The currency slid 2.8% against the dollar in 2024 for a third consecutive yearly decline, momentarily dropping below 7.3 per dollar.

Stocks and bond yields in China faced sharp declines, with the benchmark index falling nearly 3% and long-term bond yields hitting record lows. Despite government efforts, including rate cuts and relaxed real estate rules, to stimulate an economy hampered by a property crisis and deflation, investors await substantial policy actions expected during China's parliamentary session in March.

Meanwhile, the yuan's trade dynamics showed restraint as trading for dollar/yuan above 7.3 ceased. Unnamed traders suggest regulatory intent to maintain a stronger yuan level. Investor nerves linger over Trump's tariff threats on Chinese imports, suggesting a challenging period for Asian currencies, further highlighted by recent market performance declines.

(With inputs from agencies.)