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China's currency fell to an eight-year low against the U.S. dollar Tuesday as investors pulled cash from various emerging markets amid a surge in Treasury bond yields in a move that could revive a potentially damaging campaign promise from President-elect Donald Trump.
China's yuan trades within a tight 2% band against the greenback set each day by the People's Bank of China, which makes no secret of its desire to manage the currency's value in international foreign exchange markets. Earlier Tuesday, the yuan drifted to 6.86 against the dollar, extending its full-year decline to 5% and to the lowest level since December 2008.
Perhaps sensing the sensitivity of the move in the context of last week's U.S. elections, China's official Xinhua News Agency published a report that the country's President, Xi Jinping, had urged Trump in a late Monday telephone call for a meeting between the two leaders at "the earliest date" and vowed to maintain close contact in the months ahead.
Trump has repeatedly accused China during his campaign of keeping the yuan artificially low in order to boost exports and has said he'll officially label the country as a currency manipulator on the day he takes office.
"We can't continue to allow China to rape our country, and that's what they're doing," he told a rally in Indiana earlier this spring, a message that clearly resonated with mid-western workers who feel that China's massive trade surplus has resulted in what Trump has described as "the theft of American jobs."
The weaker yuan, however, hasn't really been a boost to China's overseas trade, with data released last week showing exports fell for the seventh consecutive month. China's October shipments directly to the U.S. fell 5.6%, the country's statistics office said, against a 6.9% decline in U.S. imports. In fact, China's U.S. trade surplus so far this year -- $208 billion -- is down 4.7% from the same 10-month period last year.
The complexity of U.S-China relations, however, likely means that Trump won't push for its most important trading partner to be labelled a currency manipulator in the near-term, owing in part to that country's genuine efforts to allow the yuan to move more freely in global foreign exchange markets.