08-04-2019, 08:49 PM
** 04-Aug-2019 World View: China's yuan (renminbi) currency breaks 7 to the dollar
For those who care about such things, in the last hour, China has just
fixed its yuan (renminbi) currency exchange rate to 7.0335 to the
dollar, as reported on Bloomberg TV.
The exchange rate has been below 7 for years, and China has remained
committed to keep it below 7. The fact that the exchange rate
has increased above 7 means that the yuan currency has been
falling in value (since you pay more yuan when you use the
currency to purchase dollars).
The weakening of China's currency has been a subject of debate in
Washington recently because of the US-China trade war. Donald Trump
has place tariffs on Chinese products. This means that when US
companies purchase these products, they have to pay a tax that goes
into the US treasury, and the company passes those taxes on to
consumers in the form of price increases.
However, the Trump administration claims that China is paying for the
tariffs, and points to the fact that prices have not been increasing
since the tariffs were implemented.
The way this works, according to the Trump administration, is that
China has been absorbing the cost of the tariffs in two ways -- by
lowering their prices for products, and by weakening the yuan currency
so that you need fewer dollars to pay for a Chinese product priced in
yuan.
This evening, China weakened the yuan currency significantly, and this
supports the position of the Trump administration.
---- Sources:
https://www.bloomberg.com/news/articles/...ium-europe
(Bloomberg, August 4, 2019, 9:22 PM EDT)
For those who care about such things, in the last hour, China has just
fixed its yuan (renminbi) currency exchange rate to 7.0335 to the
dollar, as reported on Bloomberg TV.
The exchange rate has been below 7 for years, and China has remained
committed to keep it below 7. The fact that the exchange rate
has increased above 7 means that the yuan currency has been
falling in value (since you pay more yuan when you use the
currency to purchase dollars).
The weakening of China's currency has been a subject of debate in
Washington recently because of the US-China trade war. Donald Trump
has place tariffs on Chinese products. This means that when US
companies purchase these products, they have to pay a tax that goes
into the US treasury, and the company passes those taxes on to
consumers in the form of price increases.
However, the Trump administration claims that China is paying for the
tariffs, and points to the fact that prices have not been increasing
since the tariffs were implemented.
The way this works, according to the Trump administration, is that
China has been absorbing the cost of the tariffs in two ways -- by
lowering their prices for products, and by weakening the yuan currency
so that you need fewer dollars to pay for a Chinese product priced in
yuan.
This evening, China weakened the yuan currency significantly, and this
supports the position of the Trump administration.
---- Sources:
https://www.bloomberg.com/news/articles/...ium-europe
(Bloomberg, August 4, 2019, 9:22 PM EDT)
