Why focus on the currency’s value?
The dollar has appreciated over the past year in anticipation of the US raising interest rates for the first time since the financial crisis. Since the yuan loosely tracks the dollar, it has been dragged higher – keeping its differential with the greenback roughly the same, but at the expense of making the country’s goods dearer compared to regional rivals, especially South Korea and Japan. That has hit Chinese exports badly. Now the US Federal Reserve is close to its first rate rise in seven years, potentially pushing the dollar to new highs, the situation is set to worsen from China’s point of view.