China’s Official Yuan Rate Crosses 7-Per-Dollar Milestone

The U.S. this week designated China a currency manipulator.


Photo:

petar kudjundzic/Reuters

China set a daily anchor for trading in its currency at the weakest level since 2008 on Thursday, crossing the symbolic 7-per-dollar threshold that the central bank had already allowed markets to breach earlier this week.

On Monday, Beijing let traded prices for the yuan weaken past 7 per dollar, a floor it has defended in the past, days after the U.S. threatened new tariffs on Chinese goods. In response, the U.S. Treasury designated China as a currency manipulator.

The People’s Bank of China on Thursday fixed the midpoint for onshore yuan trading at 7.0039 a dollar, 0.06% weaker than the previous day. The central bank lets the currency move up to 2 percentage points either side of that figure. It sets the fix based partly on market prices but has discretion to adjust it using a measure called a countercyclical factor. The yuan also trades in less tightly controlled offshore markets, in Hong Kong and elsewhere.

Analysts said Thursday’s fixing rate was in fact stronger than market expectations, indicating the central bank was attempting to keep the currency relatively stable.

Cliff Tan, head of global markets research for East Asia at MUFG Bank, said many investors were overly pessimistic about how much further the yuan would be allowed to weaken. “We don’t think China is weaponizing its currency,” he said.

In early trading, the yuan strengthened 0.2% to 7.0442 a dollar onshore market and was broadly steady at 7.0714 a dollar offshore.

Brad Setser, a senior fellow and China expert at the Council on Foreign Relations, said market moves earlier this week implied Beijing would let the yuan fix cross 7 eventually.

Ken Cheung, senior Asian foreign-exchange strategist at Mizuho Bank, said China was trying to keep any depreciation moderate, and to establish a new equilibrium for its currency. He expects the yuan to trade around 7.1 a dollar in the near term.

The Trump administration called China a currency manipulator after the yuan weakened past the psychologically important level of seven to the dollar. Here’s what this means for trade talks and the markets. Photo: AP

Write to Joanne Chiu at joanne.chiu@wsj.com and Steven Russolillo at steven.russolillo@wsj.com

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