The Chinese yuan saw a deep fall as it slid to 11-year lows against the dollar.
The Chinese currency slipped to decade-low levels on Thursday, as it slipped past the crucial support level of 7. The yuan has decreased to 7.0749 against the dollar, which is a fall by 0.2 percent.
The yuan has been trading within a range set by the Chinese government, but it moved past the range on Thursday.
The trade war has affected the economies of both the U.S. and China, which are the biggest economies in the world. Both countries face a slowdown which is affecting normal business activities.
Chinese exports to the U.S. witnessed a deep fall as they were hit by the tariffs imposed on them by the Trump administration. But the newly announced tariffs have affected trade further. This has moved the trading band within which the yuan was trading, making the currency break its crucial 7 levels.
With the yuan weakening, Chinese exports have become cheaper. Now, importing Chinese products are more attractive than the demand for American goods. This will boost the demand for Chinese goods which will also help the country’s economy. Further, the U.S. products will become more expensive compared to those made in China.
The Chinese yuan also known as the renminbi, has become weaker which will boost Chinese exports, says Mark Williams, a senior economist at Capital Economics. However, he says that the U.S. products will not be affected, as the demand for U.S. products by China has already decreased significantly. It has fallen by 19 percent in the month of July on a year-on-year basis.
Earlier this month, China allowed its currency to fall past seven yuan against the dollar.
The Australian dollar fell 0.2 percent to $0.6768, while the Canadian dollar fell by 0.1 percent. The euro slid 0.1 percent to $1.1072. Sterling saw a spike to 1.2243 against the dollar.