China's currency fell to a 16-month low as the prospect of sharp inflation from the incoming Trump administration fueled concerns about growth in the world's second-largest economy.
On the beach renminbi It fell 0.1 percent to Rmb7.34 against the dollar on Wednesday, its weakest since September 2023, although the People's Bank of China maintained a steady pace of correction ahead of Donald Trump's inauguration this month.
The Chinese currency is allowed to trade within 2 percent of the daily value set by the central bank, and the exchange rate is approaching the lower limit of that trading band.
The pressure on sales partly reflects fears that rising tariffs on Chinese goods proposed by Trump will force the PBoC to weaken the renminbi to offset its impact on exports, which has helped the country maintain economic growth amid weak domestic consumer demand.
“The market is impatient and wants to blow on the renminbi,” said Wee Khoon Chong, senior market analyst at BNY.
The PBoC on Wednesday announced a daily stop rate of Rmb7.1887 against the dollar, almost unchanged from Tuesday's Rmb7.1879. But pressure on the exchange rate increased after strong US economic data drove the dollar on Tuesday.
Selling pressure on the renminbi “basically reflects the Trump trade”, said Ju Wang, head of China's largest foreign exchange and rates strategy at BNP Paribas. “The market has been doing this since the US election. . . we feel like a lot of value has been sold, but the market doesn't want to give up.”
Wang said the PBoC appears to be in a “wait-and-see mode”.
The central bank wants to keep the exchange rate stable as it waits for more clarity on Trump's trade policies, analysts said, adding that any small adjustment could risk a major sell-off in China's currency.
Trump said he would set fees up to 60 percent in China.
Chinese shares fell again on Wednesday, with the domestic CSI 300 shedding 0.3 percent and Hong Kong's Hang Seng benchmark down 1.1 percent.