China's Currency Tactics: Preparing for a Second Trump Era

China is considering allowing the yuan to weaken in 2025 in response to potential higher trade tariffs from a second Donald Trump presidency. Market analysts have mixed views on the currency adjustment strategy, which aims to mitigate tariff impacts but could risk backlash from trading partners.

In a strategic move likely to stir international markets, China is considering allowing the yuan to weaken in 2025 to prepare for potential higher trade tariffs during a second Donald Trump presidency, sources familiar with the matter told Reuters.

This revelation affected foreign exchange markets, causing the yuan to dip by 0.3% to 7.2803 per dollar, and prompted a decline in China-sensitive currencies such as the South Korean won and New Zealand dollar. The Australian dollar hit a one-year low.

Market analysts weighed in on the potential impacts. Fred Neumann of HSBC suggested currency adjustments could mitigate tariff effects but warned of potential backlash from trading partners. Meanwhile, Mizuho's Ken Cheung cautioned about risks of regional currency pressure amid an escalating trade war, while Lynn Song emphasized the need for balanced currency depreciation.

(With inputs from agencies.)