Threats of Escalated U.S.-China Trade War Hits Currencies
The Indian rupee continued fall in Asia, tapping new lows against the dollar even as the greenback climbed.
The U.S. Dollar Index, which tracks the greenback against a basket of currencies, was up 0.03% to 95.13 at 11:30PM ET (GMT 03:30). The dollar lost some ground overnight against the euro and the pound sterling after hopes improved for a Brexit deal over the next few weeks.
The drops in the US dollar followed a threat by U.S. President Donald Trump on Friday that he is considering significant additional tariffs on Chinese imports that could potentially cover the entirety of U.S. imports. The threat sent both the currency and equities down.
Trump threatened to impose tariffs on an extra $267 billion worth of Chinese products over and above tariffs on an $200 billion worth of Chinese goods for which public consultations have concluded. Trump said that the tariffs on the $200 billion of Chinese goods could “take place very soon, depending on what happens with them.”
The Chinese yuan weakened, with the USD/CNY pair rising 0.24% to 6.8612.
Down under, the Australian dollar hit a two-and-a-half-year low on Friday as the AUD/USD pair went up 0.01% to 0.7106, the first time the Australian dollar has traded below 71 US cents since February 2016.
The U.S. and China are Australia’s major trade partners. The ongoing trade dispute as well as the country's dependence on foreign investment have combined to push the currency lower.
“AUD broke below key technical levels on Friday and a test below $0.7 cannot be ruled out over the short term. Eyes will remain on trade headlines with any negative impacts to China likely to hurt AUD,” said Cherelle Murphy at ANZ.
A jump in the USD/CNH pair also helped push the Australian dollar down. The pair was trading up 0.02% to 6.8718.
Elsewhere, the USD/JPY pair was flat at 111.03.