China fixes Yuan mid-point at weakest level since Dec. 25, 2017

Omkar Godbole FXStreet Contributor

Weaker Yuan is likely China's answer to Trump's trade war.

The People's Bank of China (PBOC) set the Yuan mid-point/reference rate at 6.5569 today - the weakest fix since Dec. 25, 2017. The Chinese currency has been taking a beating of late. At press time, USD/CNY is trading at 6.5830 - also the highest level since December 2017 and up 5.4 percent from the yearly low of 6.2437.

The central bank announced a cut in the reserve requirement ration on Sunday - the move is seen infusing $100 billion to help the economy cope up with the pressures of a trade war with the US. Also, PBOC did not hike rates following the Fed's 25 basis point rate hike. The resulting widening of the yield differential in the USD-positive manner seems to have put a strong bid under USD/CNY pair.

It appears China is banking on a weaker Yuan to soften the blow from Trump's trade war tactics.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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