By late afternoon local time Monday, one Chinese yuan was worth 14.2 cents. It hasn't been that low since February 2008, and that puts it "below the politically sensitive" seven-per-dollar level. The "breaking seven" news garnered comments from President Trump and triggered Wall Street's worst day of 2019, with the Dow closing down 767 points, or 2.9%. The S&P 500 lost 2.91%; the Nasdaq finished down 3.5%, per MarketWatch. Read on for explanation and analysis:
- The US perspective: The weakness of the yuan is among US grievances against Beijing. American officials complain it makes Chinese export prices unfairly low, hurting foreign competitors and swelling Beijing's trade surplus. The AP explains that the level of seven yuan to the dollar has no economic significance, but it could revive US attention to the exchange rate. It comes after Trump last week threatened 10% tariffs on an additional $300 billion of Chinese goods, effective Sept. 1. That would extend penalty duties to almost all US imports from China.
- Trump's perspective: On Monday morning the president tweeted, "China dropped the price of their currency to an almost a historic low. It's called 'currency manipulation.' Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!"