Europe gets the yuan rise it wants — just not the way it wanted
TLT•The euro has fallen to a 3½-year low against the offshore yuan as French debt tensions weaken the single currency. The yuan has risen as much as 10% against the euro over the past year, while an EU-China deal would cap Chinese hybrid-car imports at 350,000 a year.
1. Yuan strengthens against euro
French debt tensions have pushed the euro to a 3½-year low against China's offshore yuan, helping blunt the competitive threat from expected Chinese exports. The yuan has gained as much as 10% against the euro over the past 12 months, including 5% in the past six weeks.
2. Trade limits and concerns
The European Union and China reached a deal to limit Chinese hybrid-car imports to 350,000 vehicles a year, most likely from early December, with a 6% annual increase thereafter. Chinese hybrid exports to the EU tripled to $7.5 billion in the first half of this year from $2.5 billion a year earlier, while the bloc's trade gap with China has grown to more than €1 billion a day.
3. Currency outlook uncertain
The yuan's real effective exchange rate has risen more than 8% since the aftermath of last year's U.S. tariff shock, reaching its strongest level in two years. European leaders have called for the yuan to appreciate, but the article says the currency's longer-term path and the euro's response if France's budget standoff is resolved remain uncertain.
