The Chinese yuan (USDCNH: +0.2%) is returning today to a historical low after the People’s Bank of China (PBOC) weakened the reference rate against the dollar to 7.2038 CNH. The exchange rate broke through the psychological 7.20 level for the first time since Donald Trump's November election and is now at its lowest point since September 2023.
The yuan’s devaluation is another step in the trade war between China and the United States, aimed at boosting the competitiveness of Chinese exports following a dramatic escalation in protectionism. Within a week, tariffs on Chinese goods entering the U.S. have exceeded 50%, while American-made products have been hit with 34% tariffs by China. The PBOC’s decision will certainly be a thorn in the side of the Republican administration, which—through the voices of Trump, Bessent, and Lutnick—has repeatedly accused U.S. trade partners of “currency manipulation” and deepening the American trade deficit.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appOn the other hand, a strategic devaluation brings its own set of risks:
-
Abandoning plans to stabilize the yuan may undermine investor confidence in Chinese assets, potentially triggering capital outflows and even greater volatility.
-
Further deterioration in relations between the world’s two largest economies, along with firm retaliation pledges from both sides, sets the stage for a significant slowdown in economic growth. In March, the OECD projected GDP losses of 0.7% for the U.S. and 0.1% for China within three years of implementing even modest 10% bilateral tariffs—highlighting just how high the stakes are, even with protectionism in such a limited form.
Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
