China’s yuan currency recently fell 0.19 percent to CNY 6.59 (EUR 0.89) per dollar, the lowest level since February 2011, extending its drop over the past month to one percent.
The downward trend hasn’t yet caused the kind of turmoil seen last August, when global investors reacted with panic to an unannounced manoeuvre by China to lower the value of the yuan. But most investors believe the yuan will slide further this summer. Investment bank Goldman Sachs said earlier this month it was “outright negative" on the yuan.
This is good news for Chinese seafood exporters, but not so for the import trade, which relies on the strength of the yuan versus the dollar to drive consumption.
China has fought for months to prop up the value of the yuan. In the long run, the depreciation may be positive if it shows China’s central bank is allowing the market to react to uncertainty on its own (the government’s stated goal). It will also be a positive step if a more market-oriented yuan emerges, reducing the Chinese government’s often unpredictable influence on currency-fixing.
