The US dollar rallied on Monday, surging to its highest level in more than a year on what The Wall Street Journal boiled down to “turbulence abroad.”
The grab bag of factors cited included higher US interest rates, political risks in Europe, and trade tensions with China, as the yuan again slid versus the dollar amid trade uncertainty.
But Beijing is signaling that it will support the yuan for now, despite the fact that a weaker yuan offsets the effect of tariffs on Chinese goods.
In a report on Friday, China’s central bank pledged to “reinforce macro-prudential” management of the currency, wording that replaced a previous commitment that “market supply and demand will play a larger role in determining the exchange rate.”
The currency has tumbled nearly 10% in the past six months alone and is teetering near the psychologically important 7 yuan per US dollar mark.
The report on Friday signals that the bank will be erring on the side of supporting the yuan, rather than allowing flexibility. The currency recently reached its lowest point versus the US dollar in a decade.