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USD/CNY jumps to highest level since May 25, 2017

8/3/2018, 11:43:29 AMMarket Analysis
USD/CNY jumps to highest level since May 25, 2017

The USD/CNY pair gapped higher and rose to 6.8724, the highest level since May 25, 2017, on US-China trade worries and weaker PBOC fix.

The world's second-largest economy has threatened retaliation if the Trump administration raises tariffs on the Chinese imports to 25 percent from 10 percent.

The escalating US-China trade tensions and the resulting CNY weakness indicates the investors are likely expecting the trade war to inflict greater damage on the Chinese economy.

The PBOC likely holds a similar opinion and hence is devaluing the CNY as the weaker currency might help the economy absorb the shock much better.

The Chinese central bank weakened the CNY daily fix by 380 basis points to 6.8322 against the US dollar earlier today, practically egging markets to bet against is currency.

At press time, the USD/CNY pair is trading at 6.8712.