fbpx

Export currencies drop as trade war fears return

US President Donald Trump’s decision to impose fresh sanctions on goods imported from China caused problems for the foreign exchange markets as trading for the week kicked off.

Last week, Trump said that the new tariffs would need to kick in on September 1st after negotiators between the two countries, who have been gripped by trade war-related problems for months now, were unable to find resolutions to their problems.

The Chinese yuan suffered badly from the changes. It reached a historic 11-year low point as a result of the developments, and it went below the point of seven yuan per dollar.

The value of the yuan is partly controlled by the Chinese state, which stands in contrast to most other major currencies around the world, the rates for which are mostly market-derived.

The main demarcating line between the currencies which performed well and those which didn’t was whether the currencies were export-heavy or not.

China’s economy is heavily reliant on exports, which makes it less desirable during a time of growing trade barriers.

The Australian dollar, which is deeply linked to the Chinese yuan due to close trading relations between the two nations, dropped by half a percentage point to $0.6748 in its pair with the US dollar.

The Korean won, which is not usually mentioned in major forex news, hit the headlines due to the size of its decline. It went down by 1.4% against the US dollar, which marked its worst performance in three years.

Investors who had previously looked to the yuan as a value destination instead took their cash to currencies widely considered to be “safe havens”.

The Japanese yen was one of the only Asian currencies to benefit, and was at one stage seen rising by 0.7% against the US dollar. It attained a position of 105.89 at one stage.

The US dollar index, which is an artificial monitor designed to track the performance of the currency in comparison to six other global currencies, had no reason to gloat. It was down by a tenth of a percentage point, and at one stage was recorded at 98.032.

In the UK, suggestions in the media that new Prime Minister Boris Johnson was considering calling a general election meant that the pound continued in its tumble. It lost half a percentage point in its pair with the US dollar and reached $1.2105 at one stage. The currency is currently gripped by speculation over the outcome of Brexit, which is not yet resolved. Johnson, who took office two weeks ago, is considered a “hard Brexiteer” and is believed to be willing to take Britain out of the bloc without a deal in October.

A general election in the country is believed to be possible in September or October as a way of breaking the deadlock in the House of Commons.

For the single European currency, the day was kinder. The dollar fell against the euro and reached $1.111 at one stage, giving the euro some respite from a range of economic worries.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


Popular Brokers