China's currency, the yuan, was pegged at the lowest level against the U.S. dollar in more than three months Wednesday, suggesting officials are ready to take a hard line on trade talks as President Donald Trump sends a delegation to Beijing later this week.
The yuan's level was set earlier Wednesday by the People's Bank of China, the country's central bank, following two days of trading holidays, taking the mid-point rate to 6.3670 per dollar, the lowest since Jan. 25. The larger-than-expected reduction followed data which showed that, while the country's manufacturing sector is expanding modestly, export sales fell for the first time since October 2016, suggest trade tensions with both Washington and the rest of the world could be hitting the world's second-largest economy.
The peg also comes as Trump's heavyweight team heads to Beijing to talk trade and security, with expectations that Treasury Secretary Steve Mnuchin, Trade Representative Robert Lighthizer, Commerce Secretary Wilbur Ross and White House Advisers Larry Kudlow and Peter Navarro can achieve at least a partial breakthrough a brewing trade war that has elicited tariffs on $50 billion's worth of China imports into the U.S. and reactionary levies on agricultural goods into China.
Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country. Very much like North Korea, this should have been fixed years ago, not now. Same with other countries and NAFTA...but it will all get done. Great Potential for USA!— Donald J. Trump (@realDonaldTrump) May 1, 2018
China's U.S. trade surplus, however, ballooned by 19.4% to $58.25 billion in the first three months of the year, official data indicated earlier this week, even as Beijing recorded a $9.863 deficit with the rest of its trading partners around the world.
China's move on the yuan, however, may also be a simple reaction to the recent rise in the dollar, which hit a 2018 high against a basket of six major peer currencies late Tuesday as investors bet on a hawkish tone from Federal Reserve Chairman Jerome Powell and his colleagues later today when their two-day policy meeting ends in Washington.