The offshore yuan weakened to around 7.16 per dollar following the announcement of a new stimulus package from China.
Yuan weakens against the US dollar
On Friday, China revealed plans to allocate an additional CNY 6 trillion to help local governments manage hidden debt, a measure set to take effect this year and continue through 2026. Additionally, the government intends to issue CNY 800 billion annually in special bonds for local governments over the next five years, totaling CNY 4 trillion. These initiatives aim to reduce hidden debt from an estimated CNY 14.3 trillion to CNY 2.3 trillion by 2028.
Trump's effect on the forex market
Despite these efforts, investor concerns persist over potential tariffs under a Donald Trump presidency. During his campaign, Trump proposed significant tariffs, including a 60% levy on Chinese goods, to boost U.S. manufacturing. His proposed tariff and tax policies are seen as inflationary, potentially driving up U.S. interest rates and exerting further pressure on currencies like the yuan.
