- Chinese currency accelerated devaluation on US-Chine tensions.
- US State Department determines Hong Kong is no longer autonomous.
The USD/CNH (Chinese offshore yuan) rose to an all-time high on Thursday at 7.1965 and then pulled back modestly. The move higher takes place amid increasing tensions between the US and China. As of writing, trades at 7.1835; the last time it traded at current levels was back in August 2019 when it reached 7.1950.
The USD/CNY (Chinese Yuan Renminbi) is testing 2019 highs near around 7.1850. If it breaks above, it would be trading at the highest since 2008.
While the reopening of the Chinese economy should strengthen the yuan, the situation in Hong Kong likely changed things. Also, it should be taking into account that further depreciation of the yuan could also be seen as a political message from Beijing to Washington. The People’s Bank of China controls the exchange rate.
US Secretary of State Pompeo announced that Hong Kong is no longer autonomous from China in a statement. On Thursday, a new national security law is expected to be approved in China. The US decision could have implication for the future and could eventually lead to sanctions against China and to the end of special trade rules with Hong Kong.
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