Volatility in China's yuan due to escalating US trade friction: PBOC official

Volatility in China's yuan due to escalating US trade friction: PBOC official

FILE PHOTO: Chinese 100 yuan banknotes in a counting machine while a clerk counts them at a branch
FILE PHOTO: Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, in this March 30, 2016 file picture. REUTERS/Kim Kyung-Hoon/File Photo

SHANGHAI: Volatility in China's yuan since August is a normal market reaction to escalating trade frictions stoked by the United States and was caused, to some extent, by Washington's decision to raise tariffs, a senior Chinese central bank official said.

Zhu Jun, director-general of the People's Bank of China's international department, made the comments on Saturday (Aug 10) to a forum held in the northern Chinese province of Heilongjiang.

The U.S. Treasury Department on Monday labelled China a currency manipulator, hours after China let the yuan drop through a key support level to its lowest point in more than a decade. The moves jolted financial markets, fueling fears of a global currency war.

Days earlier, U.S. President Donald Trump had vowed to impose a 10 per cent tariff on US$300 billion of Chinese imports from Sep 1, ending a temporary truce and sharply escalating the trade dispute.

Zhu said that the yuan's move was a normal reaction to Trump's tariff threat.

"The labelling ... violates basic, common economic sense and international consensus, and is unconvincing," Zhu said, adding that the Chinese economy was resilient and capable of coping with various situations.

The year-long trade war between the world's two largest economies has already spread beyond tit-for-tat tariffs on goods to other areas such as technology, and analysts caution retaliation could widen in scope and severity, weighing further on business confidence and global economic growth.

The yuan lost 1.6 per cent against the dollar last week, but there were signs in the last few sessions that authorities were trying to stabilise it.

Source: Reuters

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