China’s Yuan currency experienced its biggest monthly drop in last 25 years. Yuan decreased 3.85% against the US dollar in August because of trade war between China and US and the weak economic growth of China.

Analysts expect Yuan to continue this bearish trend as Chinese authorities try to offset the influence of higher US trade tariffs by depreciating Yuan! Among Asia’s 11 most-traded currencies, India’s rupee, which fell 3.9% in August, is the worst performer and Yuan with 3.8% is in the second place.

“The trade tensions are a major reason for the Yuan to depreciate because it hurts the global economy – and China’s current account balance,” said Jimmy Zhu, chief strategist at Fullerton Markets. “On the other hand, the dollar is being propped up against other currencies when their central banks ease policies.”

The new US tariffs on Chinese goods and products, starting on Sunday, will bounce tensions in the cold war between US and China. US also labeled China as a currency manipulator so it is unlikely that this trade war be solved in short term!

According to Becky Liu, head of China macro strategy at Standard Chartered Bank, the increase of tariffs have had a material impact on China’s exports, which grew only 0.6 per cent during the first seven months of this year, down from 9.9 per cent in 2018!

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