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NEW YORK (BLOOMBERG) – The currency war has arrived
Thus, some of the best and brightest on the forex market of 5.1 trillion US dollars a day. US President Donald Trump on Friday accused China and the European Union of "manipulating their currencies and their interest rates."
Comments came after the yuan plunged to its lowest level in a year, with little signs of China. central bank intervening to stem the slip. They are also following a drop in the euro this year and adding to the calculation that European Central Bank policymakers may have to consider when they will meet next week.
As the world's largest economies open up a new front in their increasingly acrimonious game The consequences could be disastrous – and spread far beyond US and Chinese currencies. Everything from oil stocks to emerging market badets is likely to become collateral damage as the current global financial order is besieged from Beijing to Washington. "The real risk is that we have a large imbalance in world trade and currencies," said Jens Nordvig, Wall Street's top-ranked currency strategist for five consecutive years before founding Exante Data LLC in 2016.
Trump's recent rhetoric "is certainly changing that of a trade war"
China's devaluation of the yuan in 2015 provides a good model of what the contagion might look like, according to Robin Brooks, chief economist at the Institute of International Finance and former foreign exchange strategist at Goldman Sachs Group Inc.
Risky badets and oil prices are likely to fall due to growth concerns, particularly in foreign currencies from countries exporting raw materials, to the ruble sian, the Colombian peso and the Malaysian ringgit – before landing the rest of Asia.
"Banks this Asian countries will initially try to stem the weakness of the currency through intervention, "Brooks said. "But then Asian central banks will retreat, and in my mind, the big underperformance over a six-month horizon could be emerging Asia."
If the People's Bank of China tries to anchor the dollar-yuan exchange rate To avoid further escalation is the key, according to Nordvig. He said ECB President Mario Draghi may choose to attend the central bank meeting on July 26, as US attempts to depreciate the dollar in January were extremely unpopular in Frankfurt
. 0.8% Friday, the most since March. The euro closed the day up 0.7% to US $ 1.1724, while the yen was almost 1% stronger.
Treasury Secretary Steven Mnuchin said Friday that the United States is watching the exchange rate closely.
"There is no doubt that the weakening of the currency creates an unfair advantage for them," said Mnuchin. "We will examine very carefully if they manipulated the motto."
The next semi-annual report on the Treasury's exchange rate policy – the government's official channel for imposing the designation of manipulators – is expected in October.
In its latest report in April, the Department refrained from labeling China with the label, but intensified criticism of the lack of progress of the Asian nation in correcting its trade imbalance with the United States
. Joseph Stiglitz, an economist at Columbia University and former adviser to President Bill Clinton, said in an interview on July 17
that they would make a big effort to say what was wrong. they are doing. not motivated by this, "he added." We will not be able to say it clearly, we do not usually know the scale of the intervention. "
The greenback should continue to suffering, investors paying attention to Trump and the long wagering gap, according to Shahab Jalinoos, The world leader in the FX trading strategy of Credit Suisse Group AG
Hedge funds and other speculators are the most bullish on the currency since February 2017, according to data released Friday by the Commodity Futures Trading Commission.
"It has now been virtually defined as a currency war by the US President, since he has explicitly suggested that foreign countries manipulate exchange rates for competition purposes, "said Jalinoos, the market for reducing long positions on the dollar."
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