TheÂ Chinese yuan is stabilizing Tuesday after it cratered 2% against theÂ US dollar toÂ kick off theÂ trading week. But theÂ pause inÂ yuanâs collapse might be temporary because theÂ White House continues toÂ apply pressure toÂ theÂ worldâs second-largest economy, particularly asÂ officials discuss labeling Beijing aÂ currency manipulator. Investors will now look toÂ Chinaâs trade numbers onÂ Wednesday.
OnÂ Tuesday, China issued its first public address toÂ President Donald Trumpâs new tariffs that applied 10% levies onÂ theÂ remaining $300 billion inÂ goods. TheÂ Peopleâs Bank ofÂ China (PBOC) said that should Washington name theÂ country aÂ currency manipulator, then it would âseverely damage international financial order andÂ cause chaos inÂ financial markets.â
PBOC officials added that elevated trade andÂ currency tensions would âprevent aÂ global economic andÂ trade recovery.â It reiterated that it has not andÂ will not utilize theÂ exchange asÂ aÂ tool toÂ negotiate trade agreements.
China advised theÂ United States toÂ rein inÂ its horse before theÂ precipice, andÂ be aware ofÂ its errors, andÂ turn back from theÂ wrong path.
InÂ May, theÂ Treasury Department refused toÂ label China asÂ aÂ currency manipulator, opting toÂ monitor theÂ situation instead. However, after theÂ yuan plunged below theÂ important seven threshold, President Trump tweeted: âAre you listening Federal Reserve?â
China dropped theÂ price ofÂ their currency toÂ anÂ almost aÂ historic low. Itâs called âcurrency manipulation.â Are you listening Federal Reserve? This is aÂ major violation which will greatly weaken China over time!
Former Treasury Secretary Larry Summers weighed in, positing that there is not âmuch justificationâ forÂ theÂ label.
When you are propping up your currency, not running aÂ trade surplus, youâre not manipulating theÂ currency onÂ any definition that is understood andÂ accepted inÂ theÂ financial community.
Nevertheless, White House economic adviser Larry Kudlow believes Chinaâs economy is crumbling andÂ that theÂ US will win theÂ trade war, noting that its gross domestic product is diminishing every month. Meanwhile, Kudlow confirmed toÂ CNBC that Trump wants to continue trade negotiations and plans to host a Chinese delegation in September.
He would like toÂ make aÂ deal.
He would like toÂ continue negotiations.
Weâre willing toÂ negotiate. Movement towards aÂ good deal would be very positive andÂ might change theÂ tariff situation. But then again, it might not.
China will have important coming out onÂ Wednesday forÂ July: foreign exchange reserves, balance ofÂ trade, exports, andÂ imports. Beijing is projected toÂ record aÂ $51 billion surplus with imports contracting 8.3% andÂ exports sliding 2%.
TheÂ USD/CNY currency pair tumbled 0.34% toÂ 7.0264, from anÂ opening ofÂ 7.0507, atÂ 18:19 GMT onÂ Tuesday. TheÂ EUR/CNY fell 0.43% toÂ 7.8643, from anÂ opening ofÂ 7.8993.
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