London (awp/afp) – The yuan hit a 16-month low against the dollar on Wednesday. The markets are now fearing the heavy increase in American customs duties announced by Donald Trump, before a series of data on employment in the United States.
Around 11:40 a.m., the onshore yuan, traded in mainland China, lost 0.04% to the American currency, at 7.3316 yuan per dollar, shortly after falling to its lowest since September 2023 against the greenback, at 7. 3317 yuan. The renminbi, the other name of the Chinese currency, is approaching its lowest level since 2007.
The yuan “continues to weaken as investors position themselves for a sharp escalation in customs tariffs very quickly after the inauguration” of Donald Trump, scheduled for January 20, notes Derek Halpenny, analyst at MUFG. The American president-elect has considered imposing 10 to 20% customs duties on all products entering the United States, and even up to 60 or even 100% on those coming from China. Initial announcements concerned a 25% tax on products from Canada and Mexico.
These measures, considered inflationary, could delay the schedule of rate cuts by the Federal Reserve (Fed), which at the same time supports the dollar. According to the MUFG analyst, investors’ sentiment that Donald Trump will implement his tariff agenda appears to be reinforced by the rambling and provocative press conference he held Tuesday from his Mar-a-Lago residence in Florida.
On this occasion, he reiterated two other of his ambitions, those of annexing the Panama Canal and Greenland. The end of the yuan’s downward trajectory will also depend on “the effectiveness of measures aimed at stimulating domestic demand” in China, the world’s second largest economy currently struggling, underlines Mr. Halpenny.
Finally, the greenback benefited from “better than expected American indicators” on Tuesday, which “pushed back expectations of the next Fed rate cut,” explains Ipek Ozkardeskaya, analyst at Swissquote.
The American currency rose 0.24% against the euro, to $1.0315.
On the agenda of the session are expected the monthly report from ADP on job creations in the private sector in the United States for December, followed by the report of the last monetary meeting of the Fed last December, before more jobs data Friday.
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