China stabilizes currency but tensions with US remain high
Published 8:27 am Wednesday, August 7, 2019
BEIJING — China stabilized its currency Tuesday, suggesting it might hold off from aggressively letting the yuan weaken as a way to respond to U.S. tariffs on Chinese goods.
The yuan declined to 7.0562 to the dollar before strengthening back to 7.0297 in the afternoon. That came a day after Beijing sent financial markets tumbling by allowing the currency to fall to an 11-year low. A weaker yuan can help neutralize U.S. tariffs on Chinese goods by making them more price-competitive on international markets.
The Trump administration responded Monday by officially declaring that China improperly manipulates the yuan’s value. That opens the way to possible new penalties on top of tariff hikes already imposed on Chinese goods in a fight over Beijing’s trade surplus and technology policies.
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The sight of the world’s two economies engaging in a tit-for-tat economic dispute has shaken investors. So the fact that China let its currency stabilize on Tuesday offered some hope that the sides might try to keep the situation from escalating further. U.S. stocks clawed back some of the steep losses from Monday.
The Chinese central bank governor, Yi Gang, tried to reassure markets, promising in a statement late Monday “not to use exchange rates for competitive purposes.”
The central bank is “committed to maintaining the basic stability” of the yuan “at a reasonable and balanced level,” Yi said.