The Chinese yuan is weakening against multiple currency rivals at the end of the trading week. The yuanâs slide is being driven by another escalation in the ongoing US-China trade spat. Expectations of bearish industrial profits and manufacturing data have also contributed to the currencyâs latest dip.
Beijing announced on Friday that the government would be slapping 5%, 10%, and 25% tariffs on $75 billion in US goods, including agriculture, crude oil, automobiles, and small aircraft. These import penalties will be applied on September 1 and December 15. The latest levies are in retaliation to Washingtonâs tariffs on the remaining $300 billion in Chinese products.
Before confirming the tariffs, the Foreign Ministry urged the US to âmeet China halfwayâ and âwork out a resolution that is acceptable to both sides.â
Chinaâs State Council said in a statement:
In response to the measures by the US, China was forced to take countermeasures. The Chinese side hopes that the US will continue to follow the consensus of the Osaka meeting, return to the correct track of consultation and resolve differences, and work hard with China to end the goal of ending economic and trade frictions.
President Donald Trump immediately took to Twitter on the news and âorderedâ US companies âto immediately start looking for an alternative to China.â It is unclear what he meant by this: Will the president sign an executive order or is this just muddy language he is known for?
He also questioned who the bigger enemy is: Federal Reserve Chair Jerome Powell or President Xi Jinping.
On Friday, speaking at the Jackson Hole Symposium, the Fed Chair said that âtrade policy uncertaintyâ is weighing on the US economy. To prevent the trade war affecting US growth, Powell confirmed that the central bank would execute âappropriateâ tools to continue the expansion, but he stopped short of confirming aggressive monetary stimulus, like greater cuts to interest rates.
Next week, important data will be published: August industrial profits, which are forecast to decline by 3%, and manufacturing purchasing managersâ index (PMI), which is expected to remain in contraction.
The USD/CNY currency pair rose 0.17% to 7.0960, from an opening of 7.0837, at 18:20 GMT on Friday. The EUR/CNY surged 0.72% to 7.9060, from an opening of 7.8491.
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