Yuan Weakens Amid Trade Tensions and Economic Concerns; PBoC Signals Stability Amidst Devaluation Pressures

China's yuan is facing downward pressure amid escalating trade tensions with the U.S. and concerns about the domestic economy. On June 10, the yuan approached levels last seen during the 2007 global financial crisis, also hitting a 15-month low against its trading partners' currencies. The People's Bank of China (PBoC) has recently lowered the base rate for the national currency, aiming to support economic growth. The PBoC signals Beijing's willingness to allow currency depreciation to support exports, fixing the yuan's trading band at around 2%. A weaker yuan could make Chinese products more competitive internationally, potentially offsetting some effects of tariffs imposed by the U.S. President Donald Trump has threatened to raise import tariffs on Chinese goods to 125%, seeking to reduce trade imbalances. Mizuho Bank Ltd's chief Asian currency strategist Ken Cheung noted that the PBoC appears to be stabilizing the dollar-yuan exchange rate to manage expectations, even as the yuan index weakens. This strategy aims to boost Chinese export competitiveness against non-American trading partners. DBS Bank Ltd strategist Wei Liang Chang suggests that wider U.S. tariffs could significantly disrupt trade between China and the U.S., necessitating a weaker yuan. Trump has repeatedly accused China of currency manipulation to gain an unfair advantage in trade, while also hinting at potential meetings between leaders to address trade issues. The Wall Street Journal reports that discussions are underway for a possible meeting between the two leaders, potentially on U.S. soil.