Illustration. (REUTERS / Kim Kyung-Hoon)

Yuan Weakens, Indonesian Economy also Affected by the Condition

Estella Claudia
Market & Investment
Foreign Exchange & Interest Rate
Aug 09, 2019
3360
Beijing, China - It is reported that earlier this week, the Yuan exchange rate was decreased to 7 Yuan per US dollar, as the lowest level in the past decade. The US government accused this weakening of Yuan being manipulated by China as a countermeasure to the imposition of tariffs from US-China trade war. This situation also affected Rupiah exchange rate that is also decreased this week.

It was proven when the Yuan weakened in the trading last Tuesday (6/8), the rupiah exchange rate was under pressure to reach IDR 14,300 per US dollar. In Thursday morning trading (8/8), the rupiah exchange rate opened at the level of Rp. 14,235 per US dollar or weakened 0.07 percent compared to the closing on Wednesday (7/8) at Rp. 14,225 per US dollar.

According to the source, last week, US President Donald Trump announced plans to impose an additional 10 percent tariff on imports worth USD 300 billion from China from 1 September 2019. By weakening of Yuan, China can compensate for the increase in the price of its products due to the imposition of tariffs to the global economy.

According to Economist at PT Bank Permata Josua Pardede, other countries' currencies decreased due to the Yuan could occur because Chinese efforts to weaken their own currencies are seen as retaliating trade wars which are seen as increasing risk by investors.

In this situation, investors will look for safer assets (save heaven assets) and market sentiment to avoid risks. One of the assets considered to be the safest is to buy a developed country currency such as the US dollar or Japanese Yen.

However, today, Yuan cannot be converted freely. The Chinese government limits its movement against the US dollar, to a range of two percent from both sides of the central parity level, set by the Chinese central bank every day to reflect market trends and control volatility.

Source: https://www.cnnindonesia.com/ekonomi/20190808105427-78-419461/sinyal-bahaya-pelemahan-yuan-bagi-ekonomi-indonesia

Yuan , Weakens , Indonesian , Economy , Affected , Rupiah