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The Chinese authorities said in a statement on Wednesday, they remain hopeful that the US will adhere to the ‘one-China’ principle, per Reuters.

Additional quotes

“Taiwan is the most sensitive issue in its relations with the US.”

“Hopes it deals with the Taiwan question with caution.”

Taiwan has always been a point of contention between the world’s two biggest economies while the strain escalates on the recent US’ intrusion in the South China Sea.

Market implications

The risk-off mood could worsen if the tensions mount, which would aid the recovery in the safe-haven US dollar.

AUD/USD is back in the red around 0.7735, having hit daily highs at 0.7764 on upbeat Australian CPI figures.

Meanwhile, the S&P 500 futures drop 0.10% to near 3,840 levels, as of writing.

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