Conociendo Rusia: "Loco en el desierto"
The Chinese yuan fell to 7 against the US dollar as the global stock index has lowest close since January.
The trade war is taking a turn for the worse just as investors digest one of the roughest weeks for emerging markets this year.
China responded to Donald Trump’s latest tariff threat by asking state-owned enterprises to suspend imports of U.S. agricultural products and letting the yuan slide past 7 to the dollar to the weakest level in more than a decade. The U.S. president called the move “currency manipulation” and indicated the Federal Reserve should respond. Trump last week threatened to put 10% tariffs on a further $300 billion of Chinese goods. The latest showdown puts the Asian nation’s trade data on Thursday in the spotlight amid concern the year-long dispute is hurting its economy.
“The risk to emerging-market assets in the near term is skewed to the downside,” said Patrick Wacker, a fund manager at UOB Asset Management Ltd. in Singapore who locked in some profit ahead of the Fed’s decision. “With assets having to price in more risk for global growth and trade policy, we do not believe right now is the best time to add bonds most sensitive to market swings.”
Emerging-market currencies headed for their biggest decline since June 2016, while stocks dropped to the lowest since January on a closing basis. Assets have been under pressure since last week after the Fed, while cutting rates for the first time in more than a decade, stopped short of signaling it was the start of an aggressive easing cycle. Morgan Stanley turned bearish on emerging-market credit soon after removing a bullish call on currencies, while Citigroup Inc. said it’s time to cut risky wagers.
The drop in the yuan is expected to put quite a sharp downward pressure on currencies of economies with deep ties with China such as the South Korean won and Taiwan dollar, while the Indonesian rupiah and Indian rupee are expected to remain more resilient, according to Tsutomu Soma, general manager of the investment trust and fixed-income securities at SBI Securities Co. in Tokyo.
The central banks of the Philippines and India are forecast to lower ratesthis week, and South Korea is preparing to announce details of a plan to remove Japan from its easy-trade list as the countries’ political standoff intensifies.
“This once again shows that it’s foolish to make long-term predictions on markets and anchor positions to predictions,” said Nader Naeimi, AMP Capital’s head of dynamic markets in Sydney. “I can’t remember any other time that agility and flexibility was so paramount.”
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– BLOOMBERG
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