Yuan weakened to 1.77% in presence of United States dollar (US). (Credit : CNBC)

Yuan strengthened, currency war is over?

Siti Fatimah Adri
Politics & Economic
International
Aug 14, 2019
2369
The issue of currency war, aka currency war, began to be discussed a lot since last week. The reason is weakening of Chinese Yuan exchange rate. The weakness is deep enough, so there is a suspicion that this currency is deliberately weakened.

Over the past week, Yuan weakened to 1.77% in presence of United States dollar (US). Even the stable Yuan is in range of CNY 7 / US $, this has never happened since March 2008.

But the issue has died down today. Because at 12:55 WIB, the yuan had gained 0.29% against US dollar. the possibility of China using Yuan as a 'weapon' is still wide open.

Even so, this currency war still cannot be said to be over. Because the yuan can indeed be used as a tool to suppress and respond to US bullying. As happened last week. At that time, US President Donald Trump revealed that US would impose a new import duty of 10% on imports of Chinese products worth US $ 300 billion.

Whether intentionally or not, that same day the yuan weakened deeply and broke through the level of CNY 7 / US $. When the yuan is weak, Chinese products become cheaper in the export market so that they can freely penetrate into various countries, including the US.
Yuan is not fully in accordance with market mechanisms. Every day, Central Bank of China (PBoC) fixes the middle value of the yuan. So, Yuan can only weaken and strengthen a maximum of 2% from the midpoint.

US, which didn’t accept this, complained China to International Monetary Fund (IMF).But the IMF doesn’t see China deliberately weakening the Yuan. Yuan exchange rate is still considered in accordance with the fundamentals of the Chinese economy, not too expensive (over-valued) or too cheap (under-valued).

Source: https://www.cnbcindonesia.com/market/20190814133054-17-91962/yuan-menguat-apakah-currency-war-sudah-berakhir