CommoditiesConstruction

Yuan Plunges Amid Renewed US-China Trade Tensions as Yen Surges on Rate Hike Speculation

Economic Insights – Baghdad

The Chinese yuan experienced a notable decline in early trading on Wednesday, coinciding with renewed tensions in the trade war with the United States. This development came after the Chinese markets reopened following the lunar holiday. Additionally, the Japanese yen saw an uptick as market participants increased their expectations for the Bank of Japan to implement further interest rate hikes this year.

The dollar appreciated by over 0.5 percent against the yuan, reaching 7.2863 in domestic transactions. However, gains were tempered by the People’s Bank of China’s decision to set a higher exchange rate than anticipated, allowing currency fluctuations within a defined range of two percent.

Market observers are closely examining these policy decisions, looking for signals indicating whether Beijing may permit the yuan to depreciate further to mitigate the impact of elevated tariffs imposed by the U.S. on Chinese goods.

On the heels of this backdrop, China implemented new tariffs on American imports on Tuesday. U.S. President Trump stated that he was not rushed to engage in discussions with Chinese President Xi Jinping to address the ongoing trade dispute between the world’s two largest economies.

In external markets, the yuan traded slightly higher at 7.2835 against the dollar, a recovery from a steep decline that saw it reach 7.3765 at the beginning of the trading week.

The Australian dollar saw a slight dip to 0.62565 USD, struggling to sustain a 0.47 percent uptick observed overnight. Meanwhile, the New Zealand dollar traded at 0.5661.

As the dollar weakened, other currencies that had previously fallen—including the euro—gained ground, pushing past the $1.02 threshold to an exchange price of $1.0385.

Moreover, the yen experienced significant movement during the Asian trading session, climbing roughly 0.8 percent to its highest level in over a month at 153.09 against the dollar.

The Canadian dollar rebounded from a 22-year low reached on Monday, with the latest trading valuation at 1.4328.

The Mexican peso stabilized at 20.4896 for the dollar, recovering from lows not seen in nearly three years, which were recorded at 21.2882 on Monday.

The British pound inched up by 0.05 percent to $1.2487, while the dollar index decreased by 0.22 percent to 107.81, according to the latest data.

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