The Chinese yuan is stabilizing Tuesday after it cratered 2% against the US dollar to kick off the trading week. But the pause in yuan’s collapse might be temporary because the White House continues to apply pressure to the world’s second-largest economy, particularly as officials discuss labeling Beijing a currency manipulator. Investors will now look to China’s trade numbers on Wednesday.
On Tuesday, China issued its first public address to President Donald Trump’s new tariffs that applied 10% levies on the remaining $300 billion in goods. The People’s Bank of China (PBOC) said that should Washington name the country a currency manipulator, then it would “severely damage international financial order and cause chaos in financial markets.”
PBOC officials added that elevated trade and currency tensions would “prevent a global economic and trade recovery.” It reiterated that it has not and will not utilize the exchange as a tool to negotiate trade agreements.
China advised the United States to rein in its horse before the precipice, and be aware of its errors, and turn back from the wrong path.
In May, the Treasury Department refused to label China as a currency manipulator, opting to monitor the situation instead. However, after the yuan plunged below the important seven threshold, President Trump tweeted: “Are you listening Federal Reserve?”
China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!
Former Treasury Secretary Larry Summers weighed in, positing that there is not “much justification” for the label.
When you are propping up your currency, not running a trade surplus, you’re not manipulating the currency on any definition that is understood and accepted in the financial community.
Nevertheless, White House economic adviser Larry Kudlow believes China’s economy is crumbling and that the US will win the trade war, noting that its gross domestic product is diminishing every month. Meanwhile, Kudlow confirmed to CNBC that Trump wants to continue trade negotiations and plans to host a Chinese delegation in September.
He would like to make a deal.
He would like to continue negotiations.
We’re willing to negotiate. Movement towards a good deal would be very positive and might change the tariff situation. But then again, it might not.
China will have important coming out on Wednesday for July: foreign exchange reserves, balance of trade, exports, and imports. Beijing is projected to record a $51 billion surplus with imports contracting 8.3% and exports sliding 2%.
The USD/CNY currency pair tumbled 0.34% to 7.0264, from an opening of 7.0507, at 18:19 GMT on Tuesday. The EUR/CNY fell 0.43% to 7.8643, from an opening of 7.8993.
© AndrewMoran for Forex News, 2019. |
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Post tags: China, Dollar, Donald Trump, Exports, Federal Reserve, GDP, Imports, Larry Kudlow, Larry Summers, PBOC, Tariffs, Yuan
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