On April 9, 2025, the onshore Chinese yuan closed at its lowest level since December 2007, finishing at 7.3498 per U.S. dollar. This decline occurred amid escalating tensions in the U.S.-China trade war, which have significantly impacted currency markets. The offshore yuan also fell to a historic low during overnight trading, reflecting the broader instability in the currency's value.
The depreciation of the yuan follows the implementation of new "equal" tariff measures by U.S. President Donald Trump, which took effect on the same day. These measures impose tariffs as high as 104% on various Chinese goods, intensifying the economic pressure on China.
In response to these developments, Chinese leadership convened a meeting on April 9 to discuss strategies aimed at boosting the economy and stabilizing capital markets. Insiders reported that the discussions would focus on mitigating the adverse effects of the tariffs and finding ways to support the yuan.
According to a report from Xinhua Finance, the central parity rate of the yuan against the U.S. dollar was lowered by 28 points to 7.2066, marking the lowest level since September 11, 2023. Despite this, the offshore yuan managed to recover the 7.4 level, initially dipping below it before strengthening and approaching 7.38, with a cumulative increase of over 400 points on April 9.
Analysts have indicated that the trade environment is a significant short-term factor influencing exchange rates. Li Liuyang, Managing Director and Chief Foreign Exchange Analyst at CICC Research, emphasized that this week’s focus should be on changes in exchange rate policy, particularly as the onshore yuan approaches the 7.30 mark. He noted that the current rate of depreciation is the most significant observed this year, diverging from market expectations.
Market observers are closely monitoring the central bank’s intervention strategies. Zhang Meng, a foreign exchange and interest rate strategist at Barclays, pointed out that the People’s Bank of China’s (PBOC) intervention has been relatively light thus far. This week’s developments will be crucial in determining whether the yuan can maintain stability in the face of ongoing external pressures.
Sun Tao, a strategist at Goldman Sachs focusing on North Asia and Chinese interest rates, suggested that the PBOC might opt to release depreciation pressure through the CFETS basket currency index. He believes that while the yuan may weaken against the dollar, the CFETS index could remain relatively stable, particularly in a context where the dollar itself is under pressure.
In the broader context, the yuan has exhibited low volatility compared to major international currencies, demonstrating a degree of resilience. The CFETS RMB exchange rate index has remained stable, fluctuating between 98.7 and 99.0, indicating that the yuan's overall performance is being managed effectively amid these tumultuous conditions.
Market analysts are cautiously optimistic about the yuan's prospects. They suggest that while significant depreciation is unlikely in the near term, the potential for continued volatility exists, especially if market conditions remain uncertain. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, echoed this sentiment, stating that the yuan's stability is underpinned by solid foundations, despite the short-term shocks from U.S. tariff policies.
As the situation develops, it will be essential for investors and policymakers to remain vigilant. The interplay between tariffs, economic strategy, and currency valuation will undoubtedly shape the financial landscape in the coming weeks. The Chinese government’s ability to respond effectively could determine the yuan’s trajectory and its implications for global trade.
In the investment realm, ProPicks AI has identified several stocks poised for growth, even amidst economic uncertainty. In 2024 alone, their stock selection model uncovered two stocks that surged by 150%, four that rose by 30%, and three that increased by over 25%. This performance underscores the potential for strategic investment choices, even in challenging market conditions.
As the trade war continues to unfold, the focus will remain on how these economic pressures influence not only the yuan but also the broader market sentiment. Investors will need to navigate these complexities carefully, balancing the risks and opportunities presented by the evolving economic landscape.
