The offshore price for China’s yuan fell to its lowest levels in three months against the dollar this week, a decline that in the short-term could pave the way for increases of Chinese exports. In New York trading Tuesday, the yuan fell as low as 6.2123 per dollar. In addition, the yuan forwards market, which predicts the value of the currency a year later, fell .06% to 6.2815 a dollar.
The yuan’s weakening value is tied to China’s plummeting stock market, which has lost nearly a third of its value in a month. Still, for the year the yuan has fared better against the strengthening U.S. dollar than other currencies, holding its value since March and only losing .02% of its value.
Forecasts have predicted that China’s exports will decrease only 0.2% in June compared to 2.5% in May – an improvement attributed to increasing demand from the United States. A weaker yuan theoretically reduces the cost of importing goods from China. The June trade surplus from China is expected to be around $55.8 billion.
Foreign investors have been pulling their money out of the Chinese stock market, and equity investors are likely to forego the yuan and struggling euro to invest in the dollar, which is perceived as a safer choice currently. The Chinese government has already unveiled several measures to counter its stock market crash, including pushing for the yuan to become a reserve currency that will stabilize its value.