The Chinese Yuan, also known as Renminbi, has weakened by 234 pips to 7.0560 in contrast to the US dollar as reported by the China Foreign Exchange Trade System. The spot foreign exchange market in China permits the yuan to rise or fall to a maximum of two per cent concerning the central parity rate each trading day.
The central parity rate, which determines the value of the yuan against the US dollar, is based on the weighted average of market maker prices before the interbank market opens on every working day.
This weakening of the yuan has become a trend lately, and reports show it might continue. According to analysts, the US-China trade war and the COVID-19 pandemic are the major factors responsible for the Chinese yuan’s continuous drop.
Moreover, the weakened yuan in China could boost exports, but it could also lead to several trade friction, possibly leading to severe global economic ramifications.
In conclusion, the Chinese yuan’s continuous weakening against the US dollar could affect global trade and is worth keeping an eye on.
