China’s yuan was briefly down 1.4 percent against the US dollar on Wednesday as Trump remained in dispute with former Vice President Joe Biden and is expected to win in key states such as Florida and Texas.
According to Stephen Innes, Axi’s global market strategist, the decline in the overseas yuan, where currencies are more freely traded, is the biggest one-day percentage drop since February 2018.
The overseas renminbi eventually fell loss and fell 0.7%, or about 6.7 yuan per US dollar. The tighter domestic yuan fell 0.6 percent after falling more than 1 percent in Shanghai.
“Amid the Sino-US tensions, [renminbi] According to Ken Cheung, Asia regional chief foreign exchange strategist at Mizuho Bank, market movement depends on the results of the US election. policy. “
The US election was not the only factor in currency turbulence. Chinese regulators have just stopped Ant Group̵
7;s record IPO. That adds to the uncertainty surrounding Chinese investment, according to Lorraine Tan, director of Asian equity research at Morningstar. Shares in the region were also muted with Shanghai Composite (SHCOMP)
by 0.2% and by Hong Kong Hang Seng Index (HSI)
But another Trump tenure could put new strain on US-China relations, which is becoming more and more intense over the years. What started as a trade war has turned into a broader conflict over technology and national security.
The yuan has risen against the greenback in recent months as the Chinese economy recovers from the coronavirus faster than other major nations, and as investors begin to prepare for a victory. possible Biden. The currency’s rapid appreciation even prompted the People’s Bank of China to revise some rules last month in an attempt to slow down momentum.
“Trump’s victory could limit the risk of a trade war,” Cheung said, adding that the re-imposition of tariffs could put pressure on the yuan again. The decline in February 2018 came as US-China tensions escalated and the currency weakened at a time last year as the trade war dragged on.
While some market analysts suspect that a Trump victory could deliver an even more hawkish US stance over China, economists have pointed out that any US president there will also be a strong approach to Beijing.
Analysts at JP Morgan wrote in a note last month that even if Biden wins the election, they expect relations between Washington and Beijing to continue to crack as the two countries struggle over 5G, electric networks. quantum math, artificial intelligence and biotechnology.
Others also said that a Trump victory doesn’t necessarily mean the yuan will continue to depreciate in the long term.
Terence Wu, forex strategist at OCBC Bank in Singapore, says the currency is likely to be driven by other factors, such as whether China’s economic recovery can continue on the right track. or not.
“With pandemic management still a major global problem, trade frictions could be halted,” he said.