What was notable about China’s currency in 2016 wasn’t that it had its worst year against the dollar in modern economic times. It was the costs expended to make sure it didn’t fall even more.
The yuan dropped 7% against the dollar this year. That is nearly double the drop from the year before, taking the currency on a round trip to levels last seen before the global financial crisis.
On Thursday, China moved to relieve some of that pressure. The central bank is reducing the weighting given to the dollar in the currency basket it uses to calibrate the yuan’s value. It also included other currencies in the basket including the Korean won and the Saudi riyal. The move will give China more flexibility to allow the yuan to slide further next year, potentially boosting exports.