Yuan Likely To Slip Some More If The U.S-China Trade War Maintains Current Intensity

Yuan Likely To Slip Some More If The U.S-China Trade War Maintains Current Intensity - CNY banknotes
Bill Cascade   NEW 05/09/2019 00:00:00 Forex

China and the U.S. have been locked in a trade stalemate for quite some time now, a situation that has weighed heavily on the Chinese Yuan whose value continued to weaken against the US dollar.

Analysts believe that the People’s Bank of China (PBOC) will continue to let the Yuan slip further against the dollar in an attempt to shield from the effects of the additional tariffs imposed by the U.S. government. U.S. President Donald Trump imposed additional tariffs on Chinese products worth $30 billion, and those tariffs kicked off this week.

PBOC set its mid-point range for the Yuan at its 11 and a half year low against the US dollar. This comes just a few weeks after Chinese authorities decided to let the Yuan drop past the key level of 7 Yuan per dollar. This was an indicator of just how rough things had gotten between the U.S. and China as far as their trade standoff is concerned.

The declining performance of the Yuan is evident in the USD/CNY exchange rate performance and also evident is the impact of news relating to the trade war. For example, China confirmed on Thursday that it plans to resume trade negotiations with the U.S. as of next month. 

USD/CNY Forex Chart



The USD/CNY exchange rate was bullish at the start of this week on account of the tariff rollout by the U.S. However, its overall bearish performance on Wednesday indicates that it was cooling down and this is mainly due to the U.S dollar’s weakening performance on Wednesday.

The USD/CNY currency pair rode the wave of bullish momentum on Thursday morning with the price surging from as low as 7.1243 to a high of 7.1464 at the time of this press.

This bullish performance on Thursday might have been triggered by the Yuan’s weaker stance against the dollar as investors expect Chinese authorities to maintain tight control of the currency.

The trade situation is still very volatile between China and the U.S.

Analysts have also expressed concerns over the increasing possibility that the U.S. will retaliate. Trump previously expressed disappointment in China for what he described as currency manipulation. A recent poll by Reuters that involved 60 strategists suggests that China is willing to continue allowing the Yuan to slip as long as the trade war with the U.S. continues.

The good news is that both sides have expressed interest in holding talks to try and bring the over-extended trade war to an end.

The Chinese currency will likely recover to levels below 7 Yuan per US dollar if the governments of the two countries manage to find a middle ground that will lead to the end of the trade war.

So far, the effects of the trade war have been far-reaching and have even contributed to the slowed global economy. It has also affected many businesses in both China and the U.S. as well. It is, therefore, in the interest of both parties to end the trade dispute.





More articles

US Dollar Under Pressure On Weak Economic Data

Bill Cascade   NEW 09/10/2019 00:00:00 Forex

The US dollar is struggling for direction, having lost momentum on weak employment data. The greenback has registered impressive gains, in recent months, as other majors currencies continued to edge lower...

Buy to Open Definition, Explained in Detail with Example

Bill Cascade   NEW 08/10/2019 00:00:00 Guides

There are four types of options that are commonly used in the industry. Alongside buy to open, these include buy to close, sell to open and sell to close. Here we look at precisely what the basic definition of buy to open means, alongside offering an example of it at work. By analyzing the term further, we can provide a better understanding...

Swiss Franc Eyes Fresh Gains On Safe Haven Appeal

Bill Cascade   NEW 07/10/2019 00:00:00 Forex

The Swiss franc has lost some ground against other major currencies in recent trading sessions. For starters, it is trading at two-week lows against the Euro, which has tumbled to two-year lows in recent months. While the weakness of the Swiss franc stems from weak economic data, a bounce-back could be in the offing going forward...

Turkish Lira On The Recovery As Swedish Krona Woes Persist

Bill Cascade   NEW 06/10/2019 00:00:00 Forex

Turkey's government remains optimistic about the Lira appreciation, against the dollar, over the next three years. Economic forecasts by the finance ministry indicate the government expects the country’s economy to expand by 5% next year...

Argentines Turn To the Polls To Avert Economic Crisis And Peso Volatility

Bill Cascade   NEW 03/10/2019 00:00:00 Finance

The country is struggling with one of the highest levels of inflation at 54%. High inflation levels have affected the way of life, as prices of goods continue to rise, and small businesses struggle to remain afloat... 

Free margin - Credit