According to Goldman Sachs analysts, broader market risk aversion remains close to the surface as the US-China trade war sees nothing but continued high tempers in the weeks and months to come, though traders concerned about a potential devaluation of the CNY is unlikely at this stage.
Key quotes(via Goldman Sachs)
“We continue to recommend long JPY/KRW as a tactical hedge against fresh adverse headlines. China cannot extend tariffs on US goods much further, but it has other options to retaliate, including CNY devaluation.
However, US ‘trade wars’ have tended to turn into ‘currency wars’ in which currency devaluation against the dollar is seen as provocative.
Premier Li’s comments this week that “One-way devaluation will do more harm than good to China’s economy. China will by no means stimulate exports by devaluing the yuan” suggest that, though policy makers are likely to continue a broad-based policy loosening to offset the effects of trade tensions, a sharp weakening of the CNY is less likely-for now-to be part of this mix.”