Traders offloaded Chinese yuan and Australian dollars on Wednesday after the US government said it would introduce 10 percent tariffs on a further $200 billion worth of Chinese goods.
The news represents a significant escalation in trade tensions between the world’s two largest economies and comes just days after the US imposed tariffs on Chinese products worth $34 billion, and six weeks after tariffs imposed on European, Mexican and Canadian steel and aluminium. Collectively, these developments are a threat to the global economic recovery, say analysts.
Broadly, Wednesday’s news led investors to shun risker currencies throughout the Asian session.
Of the FX majors, the hardest hit was the Australian dollar, which fell roughly half a cent to 74.1 US cents. The Chinese yuan weakened by roughly 4 fen to 6.675 and 6.692 in the onshore and offshore markets respectively.
In favour on Wednesday morning were the Japanese yen and US dollar, which typically display resilience in times of trouble. Both currencies gained across the board and were steady relative to each other at rates slightly above 111.
Elsewhere, the euro fell marginally to 1.1730 and sterling – still shaken from recent high-profile political resignations – fell to 1.3260. Both currencies recovered from eight-month lows against the Norwegian krone, which remains this year’s top performing G10 currency. The krone has made the most this year of a 20 percent increase in oil prices and is now worth 9.445 per euro and 10.682 per pound.
On Tuesday, bitcoin had its worst day in three weeks, falling by some $370 to $6,300. Like other cryptocurrencies, bitcoin continues to trade with especially low volatility – far lower than that witnessed in the heady period spanning December and January.
This is, of course, due in large part to summer trading but is also a reflection of reduced interest. In June, CNBC reported that Google searches for “bitcoin” had fallen 75 percent over a five-month period.
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