China's PBOC May Let Yuan Drop to 7.50 in 2025 as Trump Tariffs Loom

Dec 11, 2024, 07:26 AM

China's top policymakers are considering abandoning their stable yuan policy and allowing the yuan to weaken in 2025 as they brace for higher trade tariffs in a second Donald Trump presidency in the United States, according to sources cited by Reuters. The People's Bank of China (PBOC) is said to have considered the possibility that the yuan could drop to the 7.50 level against the US dollar to counteract potential trade shocks. Following these reports, the yuan dropped 0.5% to 7.2921 on Wednesday. Analysts anticipate that it could weaken further to 7.6-7.7 per dollar, although concerns over capital outflows might slow the pace. This move reflects China's acknowledgment of potential challenges due to escalating tensions between the US and China. Chinese investors are reportedly seeking protection from a weaker currency, with increased stockpiling of gold and other tangible assets amid fears of currency wars.