USD/CNY hits highest since September 2019 as US threatens sanctions

• Yuan slides to multi-month lows on escalating US-China tussle. 
• The US threatens to impose sanctions on China if the latter passes the controversial Hong Kong bill. 
• India-China border standoff is likely adding to bearish pressures around yuan. 

China’s Yuan is taking a hit on Wednesday amid the dragon nation’s rising tensions with the US and India. 

The USD/CNH pair is trading at 7.1565 at press time, the highest level since early September 2019, representing a 0.30% gain on the day. 

China’s plan to impose a national security law on Hong Kong has become the latest front in soaring tensions between Washington and Beijing. The US lawmakers and other western nations are of the opinion that the law if implemented, would be a death knell for Hong Kong’s autonomy.

US Senator Rubio tweeted late Wednesday that the US would be left with no option but to impose sanctions on China if it passes the controversial bill. It is worth noting that the two nations are also embroiled in a war of words over the origin of the coronavirus and China’s handling of the pandemic. 

Further, India-China border tensions have escalated in the past 24 hours with Chinese President asking the military to scale up the battle preparedness, visualizing the worst-case scenarios. 

The yuan’s recent decline from 7.10 per US dollar could also be associated with the People’s Bank of China’s (PBOC) willingness to tolerate currency weakness. On Friday, the central bank put the yuan fixing at 7.1209 per dollar, the weakest since 2008. 

The central bank strengthened the fixing to 7.1092 earlier today. So far, however, that move has failed to stall the slide in the currency. 

Technical levels