From Bloomberg, December 11:
- Beijing mulls letting the yuan drop to 7.5, Reuters reports
- Weakness is ‘inevitable’ but sharp drops unlikely, Mizuho says
China’s yuan slid the most in a week following a report that Beijing is considering allowing the currency to weaken next year in response to the threat of a trade war with the US.
The offshore yuan dropped as much as 0.5% to 7.2921 per dollar after Reuters reported that policymakers are mulling letting the currency depreciate, possibly to around 7.5 per dollar. It later trimmed declines.
The move triggered drops in regional peers, with the New Zealand dollar falling to the weakest in more than two years, while the Australian dollar hit levels last seen in November last year.
But devaluing the yuan can carry huge costs. A rapid depreciation could lead to aggressive capital outflows, triggering even more currency declines. The downward spiral tends to dent appetite for China stocks and bonds, risks destabilizing financial markets and hurting growth....
....MUCH MORE
Related, December 3:
"Trump Tariffs Threaten To Torpedo The Yuan"
"Corporate China seeks dollars as trade tensions rise"
