Global trade tensions could push multiple countries to begin competitive devaluation of their currencies, former central bank head Zhou Xiaochuan said.
That would compromise the shared aim of preventing competitive devaluation held by the Group of 20, a forum comprising major economies including China and the U.S., Zhou said Friday at the Lujiazui Forum in Shanghai. No country can benefit from competitive devaluation as it disrupts the global financial order, he said.
The yuan has faced headwinds lately, depreciating beyond 6.9 to the greenback on May 17, weakening more than 1,000 pips from May 10, when the U.S. government hiked punitive tariffs on $200 billion yuan of Chinese goods from 10% to 25%. Since then, the exchange rate has hovered around 6.9.
Financial markets are closely watching whether the Chinese currency will weaken beyond 7 per dollar, despite Zhou previously saying that the number 7 was not a significant marker for the yuan.
Contact reporter Lin Jinbing (email@example.com)