Like the Mexican peso, the Chinese yuan went into a nosedive against the US dollar after Donald Trump won the US presidential election on November 8. Both currencies were badly affected by uncertainty about further trade relations between the US and these countries.
The uncertainty was triggered by loud statements of the newly elected President. Among his election pledges, Donald Trump intends to reboot ongoing trade agreements and the US trade policy on the whole. During his presidential campaign, the Republican nominee frequently criticized China for “manipulating” its currency and warned that he would increase tariffs on China’s imports by 45%. Experts of Australia-based Commonwealth Bank estimated that supplies of made-in-China goods to the US could shrink 25% in one year of Trump’s presidency. The hawkish stance immediately put the Chinese currency at its lowest level since September 2010. So the yuan plunged to 6.79 against the US dollar. The Chinese currency has shed over 4% this year. Nevertheless, the renminbi is not the worst performer among other global currencies in 2016.
Donald Trump states that China’s government must bear responsibility for its deliberate devaluation on the yuan’s value. This way, the Chinese authorities make exports to the US cheaper and more competitive. So market participants will keep a close eye on whether actual US policies with Trump at the helm of the government match his rhetoric.
