
A new survey of economists paints a bleak picture for the future of the Chinese Yuan, which has already dropped nearly 3 percent so far this year against the dollar.
The Chinese Yuan, also referred to as the renminbi, is projected to drop another 2.8 percent against the U.S. dollar by the end of the year, according to a survey of economists. CNN Money reports that while the decline may not seem like much, it represents a serious shift in the Chinese economy.
The Yuan has already dropped 2.6 percent against the dollar since January 2015, most of which occurred during a two-day dip in the beginning of August ant led investors to sell off stocks in a panic around the world.
China’s central bank also added to the confusion by changing the way they set the Yuan’s 2 percent daily trading band. They now use a calculation that accounts for the previous day’s closing price instead of the murky methodologies used before.
The shift sent shockwaves throughout currency markets, spawning a wave of speculation surrounding the extent of the currency’s dip.
The projections for next year aren’t looking great either. One of the economists surveyed said the Yuan could drop to 7.50 against the U.S. dollar by the end of 2016, representing a 17.8 drop from current prices.
Not every economist surveyed had such bleak predictions, but the consensus is that the Yuan will continue to drop against the dollar as China recalibrates its policies to reflect its slowed economic growth.
Experts worry about the effect a weaker Yuan could have throughout Asia. Countries like Hong Kong, Malaysia, and Thailand, who all export a large volume of goods to China, could be in trouble as the demand for their products drops.
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