USD/CNY daily chart
When Trump was set to win the presidential election last October, this is one chart that clearly shows how China chose to respond. The fear was an escalation in trade conflict as he takes office. And when that didn’t turn out too bad in January, the Chinese yuan managed to find some stability. That is until today I guess.
USD/CNY has now jumped to 7.30 at its highest in eight weeks. And if anything, it once again shows how Beijing might choose to respond towards Trump’s latest tariffs announcement.
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It’s crazy to imagine how steep he actually did go with tariffs against China. That certainly wasn’t really expected and you can see how risk trades have been shaken up by that. It’s a major blow to global growth prospects.
Going back to the yuan, the comfort for China is that they have prepared for this somewhat since October last year. They allowed the yuan to weaken by over 4%, so they might not overreact for now. But in any case, this will surely mean more easing policy to be announced sooner rather than later.