BEIJING: China stabilised its currency on Tuesday, suggesting it might hold off from aggressively letting the yuan weaken as a way to respond to US tariffs on Chinese goods.

The yuan declined to 7.0562 to the dollar before strengthening back to 7.0297 in the afternoon. That came a day after Beijing sent financial markets tumbling by allowing the currency to fall to an 11-year low. A weaker yuan can help neutralise US tariffs on Chinese goods by making them more price-competitive on international markets.

The Trump administration responded on Monday by officially declaring that China improperly manipulates the yuan’s value. That opens the way to possible new penalties on top of tariff hikes already imposed on Chinese goods in a fight over Beijing’s trade surplus and technology policies.

The sight of the world’s two economies engaging in a tit-for-tat economic dispute has shaken investors. So the fact that China let its currency stabilise on Tuesday offered some hope that the sides might try to keep the situation from escalating further. US stocks clawed back some of the steep losses from Monday.

Published in Dawn, August 7th, 2019