, Columnist
Why Is China’s Currency Falling?
Worries about competitive devaluation are almost certainly misplaced.
It’s complicated.
Photograph: AFP/Getty Images
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Since April, the yuan has fallen by almost 8 percent against the U.S. dollar. This has led many analysts and politicians to speculate that China is intentionally trying to devalue its currency to offset the effect of President Donald Trump’s tariffs. It almost certainly isn’t.
In theory, the price of the yuan is set by a basket of more than 20 currencies, many of which are either pegged to the dollar or managed implicitly against it. Consequently, the value of the yuan is effectively the opposite of a U.S. dollar index; when the dollar goes up, the yuan goes down, and vice versa.