Global markets dip after renminbi hits weakest level in 11 years China’s central bank blames tariffs for move as Trump hits out at ‘major violation’
The renminbi lingered at its weakest level since the 2008 global financial crisis on Monday, triggering an angry response from US president Donald Trump and causing a wave of jitters across global markets.
The renminbi is permitted to trade 2 per cent on either side of a daily midpoint set by the People’s Bank of China.
The onshore exchange rate fell past Rmb7 per US dollar on Monday for the first time since May 2008, dropping more than 1.6 per cent by the end of European trading hours to trade at Rmb7.05 per dollar, as prospects of a trade deal between Beijing and Washington faded.
The midpoint set by the PBOC on Monday of Rmb6.9225 was the lowest since December, when trade tensions were last at fever pitch.
In response, Mr Trump accused China of manipulating its currency. “China dropped the price of their currency to an almost a historic low,” he tweeted. “It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”
In a statement, the PBOC blamed trade protectionism and tariffs on Chinese goods for the currency’s weakening, without
specifically mentioning the US, but added that it “has the experience, confidence and capacity to keep the renminbi exchange rate fundamentally stable at a reasonable and balanced level”.
On Monday evening in Beijing Yi Gang, governor of the People’s Bank of China, said in a statement China would not to use the renminbi to cope with “external disturbances” such as trade tensions.
“China acts as a responsible major country, will abide by the spirit of the G20 leaders’ summit on exchange rate issues, adhere to a market-determined exchange rate system, will not engage in competitive devaluation and will not use the [renminbi] exchange rate for competitive purposes,” Mr Yi said.
Year to date, the onshore rate has weakened by 2.7 per cent against the dollar. The offshore renminbi, the version of the currency which international investors can access outside of China, has slumped some 1.7 per cent to its weakest ever rate since its inception in 2010, trading at Rmb7.0940 per dollar at the end of European market hours.
The renminbi’s decline ricocheted across global financial markets, sending stocks and emerging market currencies sinking and adding fuel to an intense rally in government bonds.