Chinese yuan falls to 16-year low as trade slowed in August

China's trade slump is showing signs of easing after declines in August came in better than originally expected. But China's weak economy has sent the Chinese Yuan (CNH=X) to a 16-year low against the USD. Yahoo Finance Markets Reporter Jared Blikre joins the Live show from the NYSE to break down the report and outlook for China's economy.

Video transcript

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BRAD SMITH: China's trade slump is showing signs of easing, after declines in August came in better than originally anticipated. But the country's weaker economic backdrop is sending the onshore yuan to a 16-year low against the dollar. For more on what this all means, we've got Yahoo Finance's Jared Blikre, joining us from the floor of the New York Stock Exchange. Hey, Jared.

JARED BLIKRE: Hey there, Brad. What better place to talk about the Chinese market than the floor of the New York Stock Exchange. And I say that a little bit tongue in cheek, but these are some of the biggest stocks in the world that are affected, including Apple. So you mentioned those new import, export numbers that came out overnight, better than feared, yes.

But looking at-- what is it? 8.8% drop in exports versus a year ago. 7.3% drop in imports. And then you take a look at what's happening with respect to the trade figures between China and Europe. Those are down double digits. That is still huge. That is a big hole to climb out of.

And so far, as we've been reporting, the Chinese authorities have failed so far to really secure their markets, to stabilize their markets. Used to be 10 years ago, the Chinese investors they would try to save in stocks. Chinese government put an end to that. Got them to save in property values and in real estate. That has fallen apart. And so Chinese authorities are a little bit desperate.

Let's go to the YFi Interactive. I just want to plot the Chinese currency. This is the US dollar versus the Chinese yuan over three months. And the US dollar has surged. You can see that uptick, that latest uptick there to the highest level since 2007. This is a max chart that goes back over 20 years.

And just to show you what's happened over the last five days, in the US dollar versus all these other currencies, really interesting to see the Mexican peso, the US dollar has gained the most versus the Mexican peso out of all of these currencies. Why is that important?

Well, foreign currency traders in Asia when they wake up in the morning, they look at the cross between the US dollar and the Mexican peso because that would be Mexico being the biggest country that is next to the dollar reserve currency of the world, that is, of course, the US.

So we're looking at a year to date chart of the US dollar versus the Mexican peso, you can see the US dollar weakening, weakening, weakening, but now it has broken out. Is there something there? Mexico has rates way above ours in the 11% range. And there's also the Bank of Japan. You put all these things together, it looks like there's some trouble potentially brewing in foreign currency markets.

Both the Bank of Japan and the People's Bank of China have their work cut out for them. They need to rein in their currency devaluations. And they're kind of grasping and straws right now.

JULIE HYMAN: Yeah. Well, we'll see if anything changes on that front. There's been a lot of predictions that they might. Thanks so much, Jared, appreciate it.