This archive report was first published on 7 August 2019.
On August 7, 2019, China's currency row with the US intensified as the yuan continued to depreciate against the dollar. The People's Bank of China fixed the yuan's central parity rate at 6.9996 per US dollar, a weaker level than the previous day's rate, which had hit an 11-year low.
As a result, both the onshore and offshore yuan slid in late morning trading, reaching 7.0454 and 7.0796, respectively. This development came after the US announced plans to impose fresh tariffs on Chinese imports from September 1, prompting Washington to label Beijing a "currency manipulator".
China's central bank has denied the allegations, stating that it is "resolutely opposed" to such a label. The bank's governor, Yi Gang, has consistently maintained that China would not engage in a competitive devaluation. However, allowing the yuan to depreciate makes Chinese exports cheaper and offsets some of the burden of punitive US tariffs.
The yuan is not freely convertible, and the Chinese government limits its movement against the US dollar to a two percent range on either side of a central parity rate set by the central bank. This managed float system aims to control volatility and has kept the currency within a narrow range of 6.1 to 7.1 yuan to the dollar for the last five years.
