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Chinese currency approaches levels seen early in the year Investors think that a 7-to-1 exchange rate is envisaged as the Chinese economy begins to protect itself
Will China trigger a currency war against the dollar?
The action would be in retaliation against Trump's tariffs, with a weaker yuan for the Chinese exporters . that the weakness of the yuan has about as much to do with the tightening of the Fed and the reduction of its balance sheet as the People's Bank of China moving the needle on its floating trading band managed.
Some global investors think the yuan is going up 7.25, especially if the dollar continues to strengthen.
"If the dollar continues to strengthen and gold passes under $ 1,200 an ounce, you should not be surprised to see the yuan pass to seven. "says Vladimir Signorelli, a macro investment analyst at Bretton Woods Research in New Jersey.
The Chinese yuan trades in a four percent range in both directions. If the currency moves higher on this band, the central bank will take the high point and make it the start of a new price range of 4%. The currency is down 8% since April and 4% since the beginning of the year.
"We expect a moderate depreciation of the yuan in the short term," said Richard Turnill, chief investment strategist at BlackRock in New York. "The Chinese authorities are managing conflicting strategic objectives in a difficult environment," he says
The Fed is tightening and narrowing its balance sheet, reducing the number of dollars available. It's good for bulls, but it also makes US exports more expensive. For China, considered a competitor of US companies in Asia and elsewhere, the weakening of the yuan at 6.80 Monday morning is a combination of the strength of the dollar and a slower Chinese economy.
The yuan has already reached this level. He tested 6.90 at the beginning of the year. The Chinese currency weakens since the election of Donald Trump.
China is in semi-panic mode. They reduce taxes, reduce interest rates and initiate tax policy changes to stimulate the economy, while anticipating tariffs.
Turnill said that he did not see China resort to a 2015 devaluation to soften tariffs. Although his calculation at this time is based on the $ 50 billion of tariffs adopted this month. Trump threatens more than $ 200 billion in tariffs, which would bring trade war to Defcon 4.
U.S. Treasury Secretary Steven Mnuchin is giving a press conference at the G20 Finance Ministers and Central Bank Governors Meeting in Buenos Aires, Argentina on Sunday, July 22, 2018. Finance Ministers and Central Bank Heads of Finance G20 meet in Buenos Aires President Donald Trump's trade policies and the potential impact of a currency war. (AP Photo / Gustavo Garello)
View: China's dead cat bounces? – Forbes
Here's How China Protects From a Trade War – Forbes
Sorry, Bill Maher. U.S. GDP is expected to grow in China to 5% – Forbes
In 2015, a lack of market confidence in Chinese monetary policy contributed to the flight of capital, frightening global markets. Subsequently, China announced that it was changing its fluctuation band for the yuan in anticipation of its joining the International Monetary Fund's currency basket, special drawing rights.
China has put in place stricter capital controls among policymakers. For Turnill, this should give confidence to the government to allow the yuan to fall gradually.
"A sharp depreciation of the yuan would undermine Beijing's deleveraging effort, causing capital flight and further tightening domestic financial conditions." "This could also fuel inflation and weaken the growing interest of foreign investors for Chinese stock and bond markets."
A shares of mainland Chinese companies are down more than 20% from the record highs of January 26th. The stock exchange-traded fund of 300 shares of China (ASHR) is down Monday and 17.5% since the beginning of the year.
The US Treasury does not consider China as a currency manipulator. Therefore, any weakness of the yuan is more likely a movement in the market than the intervention of Beijing's central bankers.
President Trump said last week that the falsity of the Fed made the dollar uncompetitive. Unsurprisingly, Fed officials reject any interference in their independence and say that monetary policy is not a mystery.
The Fed meets again next week and markets are expecting a 25 basis point increase. This is likely to lower emerging market currencies, including China's.
The market is expecting a further rise in rates this year, three more next year and one more in 2020.
fell like a rock, "which implies that China manipulate the currency. Treasury Secretary Steve Mnuchin said the United States would investigate whether the recent depreciation of the yuan is the result of manipulation and that the results will be presented in the Treasury's usual half-yearly report in October
. make the yuan even more bearish than the Fed's monetary policy.
"The trade war continues to worsen," said Neil MacKinnon, an economist at VTB Capital. "Parallel to what looks like a pure exchange war," he says.
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The Chinese currency is approaching the levels observed at the beginning of the year, investors think that a 7 to 1 exchange rate is being considered. of China begins to protect itself from a trade war.
Will China trigger a monetary war against the dollar?
The action would be in retaliation against Trump's trade tariffs, with a lower yuan better for Chinese exporters. The problem is that the weakness of the yuan has about as much to do with the tightening of the Fed and the reduction of its balance sheet as the People's Bank of China moving the Needle on its managed floating trading band
think the yuan is going to 7.25, especially if the dollar continues to strengthen.
"If the dollar continues to strengthen and the dollar continues to strengthen. gold drops below $ 1,200 an ounce, you should not be surprised to see the yuan go to seven it's this strategy, "says Vladimir Signorelli, a macro-investment analyst at Bretton Woods Research in New Jersey.
The Chinese yuan trades in a four percent range in both directions. If the currency moves higher on this band, the central bank will take the high point and make it the start of a new price range of 4%. The currency is down 8% since April and 4% since the beginning of the year
"We expect a moderate depreciation of the yuan in the short term," says Richard Turnill, chief investment strategist at BlackRock At New York. "The Chinese authorities are managing conflicting strategic objectives in a difficult environment," he says
The Fed is tightening and narrowing its balance sheet, reducing the number of dollars available. It's good for bulls, but it also makes US exports more expensive. For China, considered a competitor of US companies in Asia and elsewhere, the weakening of the yuan at 6.80 Monday morning is a combination of dollar strength and slowdown of the Chinese economy.
The yuan has reached this level before. He tested 6.90 at the beginning of the year. The Chinese currency has weakened since the election of Donald Trump.
China is in semi-panic mode. They reduce taxes, reduce interest rates and initiate tax policy changes to stimulate the economy, while anticipating tariffs.
Turnill said that he did not see China resort to a 2015 devaluation to soften tariffs. Although his calculation at this time is based on the $ 50 billion of tariffs adopted this month. Trump threatens more than $ 200 billion in tariffs, which would bring trade war to Defcon 4.
U.S. Treasury Secretary Steven Mnuchin is giving a press conference at the G20 Finance Ministers and Central Bank Governors Meeting in Buenos Aires, Argentina on Sunday, July 22, 2018. Finance Ministers and Central Bank Heads of Finance G20 meet in Buenos Aires President Donald Trump's trade policies and the potential impact of a currency war. (AP Photo / Gustavo Garello)
View: China's dead cat bounces? – Forbes
Here's How China Protects From a Trade War – Forbes
Sorry, Bill Maher. U.S. GDP is expected to grow in China to 5% – Forbes
In 2015, a lack of market confidence in Chinese monetary policy contributed to the flight of capital, frightening global markets. Subsequently, China announced that it was changing its fluctuation band for the yuan in anticipation of its joining the International Monetary Fund's currency basket, special drawing rights.
China has put in place stricter capital controls among policymakers. For Turnill, this should give confidence to the government to allow the yuan to fall gradually.
"A sharp depreciation of the yuan would undermine Beijing's deleveraging effort, causing capital flight and further tightening domestic financial conditions." "This could also fuel inflation and weaken the growing interest of foreign investors for Chinese stock and bond markets."
A shares of mainland Chinese companies are down more than 20% from the record highs of January 26th. The stock exchange-traded fund of 300 shares of China (ASHR) is down Monday and 17.5% since the beginning of the year.
The US Treasury does not consider China as a currency manipulator. Therefore, any weakness of the yuan is more likely a movement in the market than the intervention of Beijing's central bankers.
President Trump said last week that the falsity of the Fed made the dollar uncompetitive. Unsurprisingly, Fed officials reject any interference in their independence and say that monetary policy is not a mystery.
The Fed meets again next week and markets are expecting a 25 basis point increase. This is likely to lower emerging market currencies, including China's.
The market is expecting a further rise in rates this year, three more next year and one more in 2020.
fell like a rock, "which implies that China manipulate the currency. Treasury Secretary Steve Mnuchin said the United States would investigate whether the recent depreciation of the yuan is the result of manipulation and that the results will be presented in the Treasury's usual half-yearly report in October
. make the yuan even more bearish than the Fed's monetary policy.
"The trade war continues to worsen," said Neil MacKinnon, an economist at VTB Capital. "Right next to what looks like a currency war," he says.
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