Prison » Chinese yuan fall sparks fear a trade war could turn into a currency war

June 28, 2018

China’s currency slid to a fresh six-month low against the dollar Wednesday, sparking speculation China could use a weakened yuan as a weapon if tensions with the U.S. turn into an out-and-out trade war.

The idea is that China could let the yuan fall, making Chinese goods cheaper on the world market as a result. However, analysts doubt that China would do that intentionally, and the chatter for now is just talk, they say.

“It appears to be a soft devaluation at this point. It created a lot of ruckus this morning, and markets were very, very on edge,” said Boris Schlossberg of BK Asset Management. “The Trump announcement today that he’s going to dial back his trade rhetoric has put a ceiling on the move for the time being.”

Some of that anxiety in the currency market lifted after President Donald Trump Wednesday said he would back an overhaul of the existing Committee on Foreign Investment in the United States, or CFIUS, and that committee would determine whether Chinese companies should be allowed to take ownership in U.S. companies. That was seen as a pullback from harsher measures that could have been imposed, such as blocking companies with 25 percent Chinese ownership from buying certain tech-related companies.

Read more

This article was posted: Thursday, June 28, 2018 at 6:00 am

Read more