The yuan will be the spot to watch this week

CNY weakness will put more pressure on trade

The Chinese yuan has weakened 2.2% in the six days since Donald Trump tweeted about putting new tariffs on China. If it falls another 1.3% it will fall below the November low and the 7.00 psychological mark is only slightly beyond that.

The low today (or high in USD/CNY) is 6.91 and a break above those key levels could trigger another salvo of rhetoric from Trump. It would also make tariffs on the $300 billion in remaining Chinese goods much more likely.

The currency regime in Bejing halts moves of more than 2% per day and effectively keeps them much smaller than that but the rising tension is surely causing capital flight from China and weakness is natural.

Key will be watching the fixing of the mid-point today. It was 6.8049 yesterday and will be much closer to 6.90 today. I’d guess at about 6.88.


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