The following article was written by Ramy Abouzaid, Head of Research at ATFX, UAE.
- Risk appetite hit as US warns of more tariffs on Chinese goods
- Global Economic Indicators
- This Week’s Economic Calendar
Asian indices under pressure, yuan falling sharply against the US dollar
The United States said it would impose tariffs on an extra $200 billion worth of Chinese imports, sharply escalating the trade war between the world’s two biggest economies. That has provided a level of support to both the yen and U.S. Treasuries, aiding them somewhat.
The United States had just imposed tariffs on $34 billion worth of Chinese goods on Friday, drawing immediate retaliatory duties from Beijing on U.S. imports in the first shots of a heated trade war. U.S. President Donald Trump had warned then that his country may ultimately impose tariffs on more than $500 billion worth of Chinese imports.
And Washington decided to impose the extra tariffs after efforts to negotiate a solution to the dispute failed to reach an agreement, according to what senior administration officials said on Tuesday.
Because of the dramatic increase in tensions, we saw a sharp drop in the Chinese yuan against the US dollar over the past two days, as shown on the graph attached above. The USDCNH pair is now very close to the 6.7333 level, which was last recorded on July 3, 2018 when tensions started to increase.
Going above this level may give the pair the momentum to continue the uptrend trend towards higher levels starting from 6.85, 6.91 then 6.9670.
(1) Data sources & references:
• Thomson Reuters Eikon.
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