Market Highlight 09.04.2025

The Chinese yuan weakened to its lowest level since 2023 against the USD on Tuesday, after the People’s Bank of China (PBOC) loosened its control over the currency in what analysts view as an effort to mitigate the negative impact of the escalating trade war with the United States. In theory, a weaker yuan helps make Chinese exports more competitive and alleviates pressure on trade and the broader economy. However, a sharp depreciation could prompt capital outflows and threaten financial stability. Prior to the market open, the PBOC set the daily midpoint rate - around which the yuan is allowed to trade within a 2% band - at 7,2038 per dollar, the weakest fixing since September 11, 2023. The yuan quickly depreciated to 7,34 per dollar, nearing its lowest level since the 2008 global financial crisis. Year-to-date, the yuan has fallen approximately 0,54% against the USD, pressured by the economic ramifications of new U.S tariffs.

U.S equity markets reversed sharply lower late in Tuesday’s session after U.S Trade Representative Jamieson Greer stated that President Donald Trump would not provide any exemptions from the latest reciprocal tariffs, which are set to take effect at noon today. President D. Trump also announced plans to impose an additional 50% tariff on Chinese imports should Beijing fail to withdraw its retaliatory measures unveiled last week. If enacted, this increase - combined with two previous rounds, one already implemented and one planned - would bring the total tariff burden imposed on China during President Trump’s second term to an additional 104%.

Upon reopening after the national holiday, the USD/VND interbank exchange rate surged by another 200 VND, reflecting mounting pressure from global tariff tensions and the recent rebound of the USD. The market will closely monitor movements in the CNY today as the new round of tariffs takes effect.

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