China’s currency is sending a warning signal about the trade war

CNBC ^ | 05/17/2019 | Patti Domm

[SeekAndFind]

China’s currency has been an important barometer for progress in U.S.-Chinese trade talks, and right now it’s signaling that things aren’t going well.

The question is whether that signal is intentional, and whether Chinese officials will step in to prevent the yuan from reaching a key psychological low of 7 to the dollar. That level has become a line in the sand for markets around the world, and if broken, it could trigger a negative reaction in risk markets globally, as investors move to price in a bigger economic impact from a longer, more contentious trade war.

The yuan has been fairly stable this year, as the U.S. and China carried on trade talks. But since President Donald Trump tweeted about new tariffs May 5, the onshore yuan or CNY, has lost 2.7% against the U.S. dollar.

“Obviously, the trade shock we’re now discussing is a full blown trade war, so it’s obviously a very serious scenario. Then we have this negotiations period, where it could be averted and that doesn’t seem to be very good at all,” said Jens Nordvig, CEO of Exante Data. “It’s also unclear whether the Chinese officials want to fight hard to keep the currency stable. That’s a question mark that came in today.”

The onshore currency, or CNH, which trades in Hong Kong and is more impacted by international traders, hit a decline to 6.945, while the onshore yuan, more controlled by the central bank, was just above 6.91 Friday. Nordvig said unlike other sessions, there was no sign Friday that the People’s Bank of China tried to stem the decline.

[dp0622]

#### em.

[MeganC]

The US simply needs to make sure that all valuations are made in dollars to prevent any more manipulation of the Chinese currency.

[kaintucky]

In times of uncertainty the US is a safe investment.

[DoughtyOne]

It’s really despicable that the media doesn’t explain why this is taking place. China has been gaming the value of their currency for decades. This has effectively cost us 30-40% on our exports into China.

We allowed it to take place all along. We did nothing. Now that we do, it’s is played off as the U. S. starting things.

B. S.

[Vermont Lt]

International trade is usually conducted in dollars.

Devaluing the Yuan makes their goods cheaper for us. It fuels inflation in internally.

[Hojczyk]

There going to drag it out til after the election..and hope Biden wins..they already own him

[I want the USA back]

Boo hoo! Chinee money ruse varue! Me clying in my won ton soup.

[nathanbedford]

Although the shrinking value of the yuan will make Chinese exports more attractive, it will also make it more expensive for the Chinese to buy the raw materials needed to manufacture exports.

If these pundits are suggesting that Australia and the Third World countries that are supplying raw materials to China would be hurt in this scenario, I quite agree but that hardly stands as an effective pressure point against America. Certainly not relative to the pain being imposed on China. Nor does it imply a crash in the whole world economy.

A devalued yuan would also make it more difficult for the Chinese to purchase the finished goods they acquire from Europe and the United States but many of these goods are essential for their tech industries.

The yuan is declining in value because the market feels that the Chinese are in a bind and are losing the argument with Trump. This article turns things upside down and portrays a positive state of affairs for the American position in the trade war to be negative.

[right way right]

lol.
We are chianeese if you please!

[DoughtyOne]

I agree in part here. It seems to me our allies would simply switch providing their supplies to where ever the current manufacturers move to, Vietnam or some other Asian nation.

It does seem they are crafting an anti-American argument here, based on Trump finally getting tough.

Not sure how many will buy it.

It’s obvious that China is taking it’s gains and building up it’s military, and using it’s future plans to cause problems in the Western Pacific and around the world.

If explained right to people, they’ll get it.

[nathanbedford]

I believe the Chinese are devaluing their currency or perhaps not taking effective steps to halt the slide because they want to compensate for the loss of the American market.

Short-term, the move to other Asian producers will not affect the outcome of this trade dispute when we are talking in terms of days, weeks and even months because it is simply too complicated to arrange the lines of supply and produce the machine tools etc. it is also time-consuming to arrange financing.

When and if the move to other Asian producers occurs, I would expect our European allies to deal with China if they're cheaper. That may be one reason why the Chinese currency is going down, to hold these customers against the entreaties of the United States. We might be able to hold Japan easier than Europe because Japan is more imminently threatened by a growing Chinese military as well as a growing Chinese economy.

If the move comes to other Asian producers, and Trump has another six years, I would expect to see him put the squeeze on those producers in an effort to bring more manufacturing back home.

[canuck_conservative]

Yuan?

You mean the Renmimbi?

[DoughtyOne]

They devalued their currency decades ago.

Not sure what the inception date or progression was, but it’s been well known that their currency was undervalued significantly.

This made things going into China to be a lot more expensive.

We couldn’t open markets, because of the problem.

We sell some in China, but nowhere enough for them to be able to slap a tariff on us and truly hurt us.

Farming products are one of the biggest areas, but our government can compensate farmers to ease the pain.

I don’t like all this, but something had to give and the Chinese government wasn’t going to do it out of the goodness of their hearts.

Charge us zero tariffs and don’t play currency games, and we’ll do the same in reverse.

China is going to get wise on this, unless they are so over-extended monetarily that they can’t.

[nathanbedford]

It is not clear whether China reneged on their written commitments as a time honored Oriental negotiating tactic or rather because there are real and desperate internal disputes in China.

I think we have to assume that the Chinese are going to push as long as they can stand the pain and see if they can break Trump or, more likely, generate enough rino resistance in his own party to make his negotiating position untenable.

The good news is that we should not have to wait long to find out, the Chinese are hurting far more than we are, you are right we can compensate the farmers, the markets are important but they are not nearly as important as the job market.

I like our hand right now much better than China's.

[DoughtyOne]

I agree with you on the points you made there.

They were sound > IMO.

[WKUHilltopper]

This.

[dragnet2]

It’s really despicable that the media doesn’t explain why this is taking place.

Exactly. And it's because a good portion of the media is the de facto communications division for deep state. Overthrowing, undermining, compromising and destabilizing governments is what they do.

[DoughtyOne]

Thanks...

[DoughtyOne]

I agree with your thoughts.

And when you think about it, deep state is actually just the front org for China, Venezuela, and other commie nations.

Sure they’re going to run cover for these entities.