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China's Yuan Hits Post Financial Crisis Low as Trade War Ramps Up

A Chinese Yuan banknote, US and Chinese flags are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration
A Chinese Yuan banknote, US and Chinese flags are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration
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China's Yuan Hits Post Financial Crisis Low as Trade War Ramps Up

A Chinese Yuan banknote, US and Chinese flags are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration
A Chinese Yuan banknote, US and Chinese flags are seen in this illustration taken, April 4, 2025. REUTERS/Dado Ruvic/Illustration

China's yuan hit its lowest against the dollar since the global financial crisis on Thursday, with the central bank cutting guidance for the sixth successive trading session amid an intensifying Sino-US trade war.

Beijing has imposed steep tariffs on US imports in response to similar US action. Though US President Donald Trump said he would temporarily lower duties recently imposed on dozens of countries, he increased those on Chinese goods.

"The US and China are currently in a powerplay game of brinkmanship," said ING global head of markets Chris Turner.

"Until a deal is announced or a big, bilateral meeting confirmed, USD/CNY will now be the focal attention of the FX market."

A weaker yuan would make Chinese exports cheaper and alleviate tariff impact on the economy. However, a sharp decline could also increase unwanted capital outflow pressure and risk financial stability, analysts and economists said.

The central bank will not allow sharp yuan declines and has instructed major state-owned lenders to reduce dollar purchases, people with knowledge of the matter told Reuters.

The onshore yuan slipped to 7.3518 a dollar in early trade, its weakest since December 26, 2007. It pared intraday losses and traded 0.02% higher at 7.3428 as of 0516 GMT, but was still down about 1.2% this month.

Its offshore counterpart was at 7.3558 at 0516 GMT, down 0.14%. It hit an all-time low of 7.4288 on Tuesday.

Prior to market open, the People's Bank of China set the midpoint - around which it allows the yuan to trade in a 2% band - at 7.2092, the weakest since September 11, 2023. That compared with the 7.3484 Reuters estimate.

The central bank has been lowering the midpoint at a measured pace, with Thursday's cut contributing to the day's decline, traders said.

The PBOC loosened its grip on the yuan this week by allowing the currency to weaken past 7.2. Still, its guidance is stronger than market projections in what traders and analysts interpreted as an attempt to keep the yuan steady.

The steadily weaker guidance dragged down its value against major trading partners. The CFETS yuan basket index, a gauge that measures the yuan against a basket of currencies, fell to 98.18 on Thursday, the lowest since September 2024, according to Reuters calculations based on official data.

The bank is focusing on a steady yuan even as the trade war challenges the competitiveness of China's export sector, indicating that stability remains the priority.

"A modest, gradual depreciation of the yuan is still the preference," Societe Generale economists said in a client note.

China will only allow gradual depreciation as stability matters for confidence in Chinese assets, and the tariffs are "just too big to be offset by FX depreciation," they said.

Separately, China and Hong Kong shares rose on Thursday. The Hong Kong dollar hovered near a four-year high against the dollar on persistent inflows through the southbound leg of the stock trading link. It last traded at 7.7616 as of 0516 GMT.

Mainland investors purchased more than HK$35 billion ($4.51 billion) worth of Hong Kong stocks on Wednesday, the highest on record.

Marco Sun, chief financial market analyst at MUFG Bank, said a strong Hong Kong dollar was critical for the financial hub during times of heightened financial market volatility.

"And the renminbi is likely to enter a period of orderly depreciation," he said.

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Business

Moody's Affirms its Credit Rating of Saudi Arabia at 'Aa3' with Stable Outlook

The Saudi flag. Asharq Al-Awsat
The Saudi flag. Asharq Al-Awsat
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Moody's Affirms its Credit Rating of Saudi Arabia at 'Aa3' with Stable Outlook

The Saudi flag. Asharq Al-Awsat
The Saudi flag. Asharq Al-Awsat

The credit rating agency Moody’s has affirmed Saudi Arabia’s credit rating at “Aa3” with a “stable” outlook.

The agency said Friday that the affirmation at Aa3 reflects Saudi Arabia’s large and wealthy economy, supported by its vast hydrocarbon endowment, and highly competitive position in global energy markets, alongside improving institutional and policy effectiveness.

Progress under Vision 2030 has underpinned solid non-hydrocarbon growth, supported by sustained public investment, structural reforms, and gradually improving fiscal and economic transparency.

Moody’s noted that Saudi Arabia’s stable outlook reflects the Kingdom’s resilience against regional geopolitical risks and potential trade disruptions, supported by strong and continued oil exports flexibility through the East-West pipeline and Red Sea terminals.

The agency also expects that the Kingdom’s progress on economic diversification is likely to continue and the momentum will be sustained over the coming years. It is supported by significant progress to date in implementing a broad-based reform agenda, including judicial, business and social reforms that have accelerated the development of the services sector and the broader non-oil economy.

Moody's expects non-hydrocarbon private sector GDP growth to return to around 4-5% after the Middle East conflict subsides, among the strongest rates in the Gulf Cooperation Council (GCC), reflecting ongoing structural reforms, sustained public investment and improving private sector participation.

Business

Morocco Farmers Saw Hope in Rain, but Mideast War Inflates Production Costs

A farmer works in his wheat field in the Sebt Meghchouch region of Morocco, on April 28, 2026. (Photo by Abdel Majid BZIOUAT / AFP)
A farmer works in his wheat field in the Sebt Meghchouch region of Morocco, on April 28, 2026. (Photo by Abdel Majid BZIOUAT / AFP)
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Morocco Farmers Saw Hope in Rain, but Mideast War Inflates Production Costs

A farmer works in his wheat field in the Sebt Meghchouch region of Morocco, on April 28, 2026. (Photo by Abdel Majid BZIOUAT / AFP)
A farmer works in his wheat field in the Sebt Meghchouch region of Morocco, on April 28, 2026. (Photo by Abdel Majid BZIOUAT / AFP)

Like many Moroccan farmers, Mehdi el-Maazi was hopeful that rare heavy rains would yield an abundant harvest this year -- but those hopes were quickly shattered as the Middle East war sent fuel and fertilizer costs soaring.

Morocco, where agriculture employs about a quarter of the working population and where drought had persisted for seven consecutive years, recorded massive rainfalls last February and December.

Across the rural region of Marchouch, about 70 kilometres (43 miles) south of Rabat, landscapes that had long been parched have turned green again, and farmers have taken back to working their fields.

Following the rains this winter, the country expected a strong cereal harvest, with output estimated to reach nearly nine million tonnes -- more than double last year's. Overall agricultural output was also set to rise by about 15 percent from last season.

But the war in the Middle East, which began in late February, has disrupted maritime traffic through the Strait of Hormuz, not only sending global energy markets into a tailspin but also choking fertilizer supplies.

Prior to the war, Maazi would normally spend around 1,200 dirhams ($130) per hectare on diesel to run his tractor. Now, he said, the cost has climbed to 1,800 dirhams.

"We were happy at first about the arrival of the rain," said the 32-year-old lentil farmer. "But with the increase in diesel prices, everything changed."

Farmers also say higher fuel prices are driving up the cost of nearly everything needed to produce crops.

Abdelkader Toukati, another farmer in the area, said he hoped "the price of diesel will fall before the beginning of the harvest season".

High prices have meant that workers' wages have also risen and even "the cost of renting harvesting machines doubled", Toukati added.

Abdelaziz Drissi, who rents out agricultural machinery, also complained that there was little to no financial reward.

"There is no longer any profit," he said. "We are only working to pay for fuel."

Rising energy costs have had a direct impact on key farming supplies, driving up prices for seeds, fertilizers, pesticides and animal feed.

Livestock breeder Abdessadaq el-Fayd said grain feed prices had sharply risen in recent months.

"We used to buy it for 90 dirhams" per sack, he said. "Today, it costs 110 to 120 dirhams."

A recent report by the kingdom's High Commission for Planning projected economic growth of five percent in the first quarter of 2026, up from 4.1 percent in the previous quarter, driven in part by agricultural activity.

In an effort to alleviate rising costs, the Moroccan government in March announced aid for transport operators.

And last month, Prime Minister Aziz Akhannouch pledged to "improve distribution chains so that prices remain at a reasonable level".

But farmers interviewed by AFP said the measures have yet to rein in prices.

Rachid Benali, president of the Moroccan Confederation of Agriculture and Rural Development, said the price hikes "mainly concern fuels and nitrogen fertilizers".

But while the high costs "will have no impact on either volume or quality" of harvests, they "will automatically be reflected" in produce prices at markets, he added.

Business

Dollar Nears Six-week High; Mixed Signals on US-Iran Deal Feed Uncertainty

US dollar banknotes (Reuters)
US dollar banknotes (Reuters)
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Dollar Nears Six-week High; Mixed Signals on US-Iran Deal Feed Uncertainty

US dollar banknotes (Reuters)
US dollar banknotes (Reuters)

The dollar traded near six-week highs on Friday, after conflicting signals over a US-Iran peace deal whipped up volatility across financial markets, though investors latched on to hopes of some progress. Washington and Tehran stuck to opposing stances over the latter's uranium stockpile and control of the Strait of Hormuz, although US Secretary of State Marco Rubio said there had been "some good signs" in talks. The dollar rose 0.17% against a basket of six major currencies to 99.37, just shy of six-week highs.

The euro, which was headed for a second weekly loss, was down 0.2% on the day at $1.1594, while the pound was slightly lower at $1.342, having shrugged off data earlier that showed retail sales dropped by the most in nearly a year in April, as consumers felt the pinch of the inflationary effects of the Iran war. The dollar found additional support from US data, which showed weekly jobless claims fell last week while manufacturing activity rose to a four-year high in May, underscoring resilience in the world's largest economy.

"We're coming to the end of week 12, we're six weeks in the ceasefire, and I'm just not really that convinced we're any closer to a resolution between the US and Iran," Tony Sycamore, a market analyst at IG, said of the Middle East war.

"I still feel like the risks are for the US dollar to go higher, because I really just don't see a way out of this situation in the Middle East without them sort of needing to be more forceful."

The US dollar's strength and persistently high oil prices have spelled pain for the yen, which on Friday struggled on the weaker side of 159 per dollar. It was 0.1% lower at 159.09 per dollar. The yen is teetering even after likely intervention from Tokyo just weeks ago to support it. It has given up nearly 75% of its gains from the presumed intervention, which has left traders on alert for further moves by Japanese authorities.

"It's just buying time, really. What they need is a change in fundamentals, and I think the best thing that could happen is a quick deal to end the Iran conflict," said Lee Hardman, a currency strategist at MUFG.

"I don't think you'd see dollar/yen drop too sharply from here, but even if it just got back down into the mid 150s, taking some of the selling pressure off the yen, that would probably be the best they can hope for right now."

The Bank of Japan is only expected to raise borrowing costs gradually while other central banks, including the European Central Bank, are likely to deliver hikes far more quickly, which puts the yen at a disadvantage with investors who seek out extra returns from higher domestic interest rates.

On a trade-weighted basis, the yen is at record lows, which favours its exporters but compounds the energy-price shock, given Japan's reliance on imported goods. Data on Friday showed Japan's core inflation slowed to a four-year low in April, complicating the outlook for BOJ policy.

Currencies in emerging Asia have also come under immense pressure owing to the surge in global oil prices, forcing policymakers to take increasingly urgent and unusual steps to shore up their economies. The Turkish lira hit record lows against the dollar on Friday after a court ruling went against the main opposition party.