China’s yuan falls sharply as Donald Trump declares US election win

China’s yuan recorded a sharp fall amid rising uncertainty as Republican candidate Donald Trump declared victory in the US presidential election.

The offshore yuan on Wednesday had at one stage fallen by more than 900 basis points against the US dollar, dropping below the 7.19 mark, before regaining some ground.

International investor uncertainty is likely to result in a stronger US dollar, at least in the short term, said Nick Marro, principal economist for Asia at the Economist Intelligence Unit.

The inflationary impact of Trump’s proposed trade tariffs would also complicate the outlook for US monetary easing, particularly if headline consumer prices jumped back up to above 3 per cent, which is very likely should Trump deliver on his policy threats, Marro added.

“The stronger-for-longer US dollar, alongside higher-for-longer US interest rates, could preserve the wide interest rate differential between the US and China, particularly as Chinese monetary settings remain accommodative,” he said.

“Alongside geopolitical risks, not least the spectre of an escalation in US-China trade tensions, these factors will preserve depreciatory pressure on the yuan.”

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