Trump set to weigh in on China

 

The foreign exchange markets were preparing themselves for some potential upheaval on Friday as US President Donald Trump looked set to weigh in on China.

 

The US and China have been locked in a battle of wills in recent weeks and months over questions relating to trade, Hong Kong and the coronavirus.

 

Tensions ramped up a notch this week as China prepared to implement a new national security law on Hong Kong – a move that is widely expected to lead to more pro-democracy demonstrations.

 

Yesterday (Thursday) saw a key milestone in this development when the Chinese parliament confirmed the new law.

 

There is now some concern that Trump may revoke some of the favourable trading conditions that the US offers to Hong Kong – a move that, if it comes to pass during Trump’s press conference on Friday, is likely to be interpreted as problematic for the autonomous city.

 

The Chinese yuan, which is traded in different forms both onshore and offshore, went down in its domestic pair with the US dollar.

 

In its internationally traded version, the picture was similarly gloomy, as there it was close to a long-term nadir.

 

However, there was little comfort for the US dollar either, with the currency bracing itself to end the week on a significant loss in its index.

 

The Dollar Index is a tool used by traders to compare the dollar to other major currencies from across the globe.

 

Up against the euro, meanwhile, it was noted at $1.1083 as trading kicked off on Friday.

 

This represented a figure close to its worst since the end of March.

 

A similar set of problems faced the dollar in its pair with the Swiss franc.

 

It was noted at 0.9632 Swiss francs per dollar at one stage, which looked set to end in a week-on-week decline of four-fifths of a percentage point.

 

The dollar appeared to be stuck in a stalemate when up against the yen, however.

 

In that pair, it hardly moved – and was spotted at 107.43.

 

This has been another week characterised by uncertainty in the forex markets.

 

Despite the above problem-focused, risk-off news related to China, traders have also found themselves with some risk-on perspectives to grapple with.

 

The European Union’s huge proposed stimulus package was one such piece of risk-friendly news, and the gradual easing of pandemic-related restrictions around the world was another.

 

Whether or not the markets will anchor themselves in either a risk-focused zone or a risk-off zone for the medium term, however, remains to be seen.

 

Elsewhere around the world, the Australian dollar was noted at $0.6630 at one stage – which was the best performance it had experienced in over two months.

 

Over the water in New Zealand, meanwhile, the local dollar there was also doing well.

 

Up against the greenback, it was noted at close to its best position since mid-March.

 

It was seen at $0.6204 at one stage.