China puts its exporters in the trouble because of the strength of the yuan against its peers

China’s strict grip on the local Yuan has led to the rise of unexpected side effects, as the yuan has risen to its strongest levels since October 2022 against a basket of trading partners, which forms a potential conditions for exporters, according to the ‘Bloomberg’ index, which detects the execution of the China’s Foreign Cash Trade System (CFTS). This strong performance coincides with the Chinese People’s Bank, which confirms the price of the local Yuan at 7.3 against the dollar since December, but the Yuan exceeded this level on Friday when it reached 7.3174 against the dollar. The challenges of the strength of the yuan, although defending the power of the Yuan Chinese assets, but it makes Chinese goods more expensive, especially at a time when US President Donald Trump threatens to impose extra customs duties. This intervention to maintain the stability of the market artificially can also lead to increased fluctuations and reduce the effectiveness of monetary policy. Alvin Tan, head of the foreign exchange strategy of “Royal Bank of Canada” in Singapore, said: “Reducing monetary policy is partly dependent on the twice the exchange rate. Thus, if the exchange rate rises, it reduces the effectiveness of this policy, which makes China’s efforts to improve the economic horizon.” The stability of the Chinese currency contributed to confirmation of the Chinese People’s Bank for the Yuan price to reduce historical fluctuations for two weeks to about 0.6% this week, which is the lowest level since July. However, analysts believe that this stability can hide sharp fluctuations in the future. “There is a sharp increase in fluctuations that will occur once the current level is broken,” note that “there is a sharp increase in fluctuations that will occur once the current level is broken.” He added that the yuan is still experiencing pressure as a result of uncertainty over the US interest rate path, Trump’s customs duties and the ongoing economic risks in China. The decline in the record yield in China has also led to a major gap in interest rates compared to the United States, which contributed to the pressure on the Yuan. The price of the reference Yuan used the Chinese bank of the Chinese people to what is known as the policy of placing the reference price of the currency, which limits the Yuan trading in the local market with a 2% margin on or off, as it was set on Friday at 7.1878, which is stronger than Bloomberg Pulps expected. The state banks also intervened by sometimes selling the dollar to reduce the fall in the yuan. The Chinese authorities will soon face a challenge to maintain this fixed level of the currency, especially with Trump’s return and before his promise to increase customs duties on Chinese goods to 60%. So far, the markets seem to reflect an inexplicable look, as Chinese stocks have recorded the worst start for a new year for almost a decade, while government bonds have had a remarkable increase. Tan indicated that the Chinese People’s bank may need to reduce its grip on a policy to stabilize the exchange rate if the dollar continues to rise or the Trump business plan becomes clear. He added: “I expect the economic weakness to push the central bank to allow further low value of the currency.”