China is considering to allow the yuan to weaken next year as trade risks loom – report

The report says that China’s top leaders and policymakers are considering to allow the yuan to weaken in 2025 amid the prospects of trade tariffs from US president Trump. The move is said to be an acknowledgement on China’s end that it needs a bigger economic stimulus to combat the threat of Trump’s tariffs.

The sources say that discussions have started on letting the yuan depreciate, in a move that is a deviation from their usual practice or communique in wanting to maintain a more stable exchange rate. Meanwhile, one source says that while the PBOC is unlikely to explicitly mention that this, it will allow markets to have more of a say in pricing the yuan’s value next year.

One other source also floated the potential for USD/CNY to rise to 7.50 in order to offset any downside from trade risks.

Well, we might have already gotten a taste of this earlier in the month: Is this Beijing’s first line of defense against Trump?

USD/CNY is seeing a spike higher on the headlines here, jumping up from 7.25 to 7.28. If this is anything to go by, the key threshold of 7.35 looks to be in the immediate crosshairs. That was the key level that Beijing leaned on to pin the onshore yuan back in 2022 and 2023.

This article was written by Justin Low at www.forexlive.com.