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An upward pressure on the USD/CNY exchange rate is expected to affect the remaining Asian exchange rates, according to the latest research report from Commerzbank. The Chinese stock market fell sharply yesterday in reaction to the latest tariff threats from the US.
The Shanghai Composite Index fell nearly 4 percent as opposed to the Dow Jones which fell just over 1 percent. A trade war between the world’s two largest economies will hurt everyone but the market is seemingly of the view that China, being a current surplus country, is likely to be hurt more than the US.
Furthermore, the United States economy is benefitting from the tail-wind from the tax cuts while China’s economy is slowing due to the ongoing deleveraging campaign.
Meanwhile, the stock market turbulence prompted People’s Bank of China (PBoC) Governor Yi Gang to issue some soothing remarks yesterday, pledging to be “forward-looking, prepare relevant policies, comprehensively use all kinds of monetary policy tools” and reiterated that China has room to face all sorts of trade frictions.
