Market Analysis

Asian currencies fall as trade war concern weigh on sentiment

Asian currencies fell across the board on Monday amidst mounting concerns over the impasse in trade negotiations between the United States and China. The offshore Chinese yuan currency suffered its biggest daily loss in nine months against the dollar while the South Korean won currency fell to its weakest trading level against the greenback since January 2017.

The overall sentiment in financial markets remained weak on Monday, with global equity markets coming under pressure due to the announcement of China’s counter-measures to the United States latest trade tariffs. The overall economic effects of the tariffs to the American and Chinese economy appeared to spook investors.

China hit-back with $60 billion of trade tariffs on some five thousand United States goods, with many of the new tariffs being placed on politically sensitive goods such as soy beans and orange juice. The trade tariffs on American agricultural based goods could start to hamper the United States economy when they take effect this June and also place additional pressure on President Trump, who faces re-election in 2020.

The Chinese yuan currency bore the brunt of the selling over expectations that the Chinese economy would start to weaken once the effects of the trade tariffs kick-in. Other Asian currencies also suffered a drubbing on the foreign exchange market on Monday due to fears of an ongoing global slowdown, with the Indian rupee falling against the U.S Dollar over concerns about weak industrial production data and rising oil prices.

The Taiwan Dollar and Thai Baht also declined against the U.S Dollar due to fears about demand from Chinese consumers slowing, while the Indonesian rupiah eased to a four-month low against the U.S Dollar. Traders are now on high-alert from fresh news coming trade talks and also key U.S and Chinese economic data releases this week.


USD/CNH Daily Mountain Chart Source ActivTrader Platform

USD/CNH Daily Mountain Chart | Source: ActivTrader

The Chinese economy releases April industrial output and retail sales figures later this week, which should provide a key indication of the current state of the Chinese economy. The USD/CNH pair is rising towards the 7.00 resistance level, which is a major technical level that traders have defended since 2008, if buyers force price above this key level we are likely to see a significant surge higher in the USD/CNH pair.


Written by Nathan Batchelor, External Analyst, ActivTrades

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