Investment.com – Most Asian currencies have increased slightly on Wednesday, while Yuan China reached the weakest level for more than 17 years after US President Donald Trump increased taxes on Beijing.
The dollar continued to weaken in the Asian bidding and the Japanese Yen to benefit from safe asset demand, as the market also began to take into account the probability of increasing recession in the United States due to increasing negative consequences from Trump's tariffs.
The dollar is specially affected by the ratio that the federal reserve system will reduce interest rates earlier and in a larger volume to compensate for the impact of Trump's tariffs. This provides some support for Asian currencies, although most of them still suffer significant losses.
The broader Asian markets also decreased by Wednesday, because Trump's tariffs also target a number of major economies besides China. Trump's tariffs will take effect from 00:01 to the East period (08:01 Moscow) on Wednesday.
Yuan China is at a minimum of 17 years, because NBK weakens control when faced with tariffs
A pair of USD/CNY Yuan increased by 0.2% to 7,3499 yuan – the highest level since November 2007.
Yuan's weakness followed after the People's Bank of China established a weaker average point for five consecutive days, because Beijing was preparing for the escalation of the trade war with the United States.
Trump on Tuesday signed a decree about making a 50% tax rate for China, as a result, the US synthetic tax rate for the country reached 104%. This figure exceeded 60%, which Trump threatened in his election campaign last year.
Trump said that a 50% increase was a reaction to the introduction of China 34% of the tax refund to the United States last week.
The weakening of NBK control over Yuan, clearly, in order to increase China's export costs, therefore can help the second largest world economy exist in a difficult trade war with the United States.
China has not intended to withdraw and the Ministry of Trade promised to “fight to the end” from the United States due to tax increase.
The markets also said that China has eliminated the vast reserves of the US Treasury bonds, which has caused a leap in profit.
Asian currency has been strengthened, strong yen
Except for Yuan, other Asian currencies have recorded a slight growth on Wednesday, recovering a small part of the recent waterfall.
Yen Nhat shows the best results: the USD/JPY pair has decreased by 0.4% and is still in the vision of a minimum of the last six months. Yena was supported by the purchase of safe assets and traders also found some comfort in fact that Japan sent delegates to trade talks with the United States.
Australian dollar Aud/USD increased by 0.5% after decreasing to a minimum of five years and a pair of Singapore USD/SGD decreased by 0.2%.
A pair of USD/Krw Vona of Korea fell 0.2% after reaching a maximum of 16 years old, because the country also encountered a high tax rate of the United States. The important Korean automotive industry also decreased below the 25% tax rate for all imported cars.
A pair of India's USD/Inr rupia increased by 0.3% before the Indian reserve bank in terms of interest rate later, where the central bank is expected to reduce interest rates of 25 basic points.
The New Zealand Dollar New Zealand/USD pair remains unchanged, even after the New Zealand reserve bank reduces interest rates, as expected, and indicates the ability to soften, although when faced with uncertain economic prospects.
The dollar is weak in the context of the fear of recession and bet betting
The dollar and future index for the dollar index decreased by about 0.5% each index in the Asian bidding, under pressure from the increasing uncertainty related to the impact of Trump's tariffs.
The market, clearly located in a high probability of recession in the United States due to the failures of Trump's policy.
This is in turn, causing a lot of bets that the Fed will reduce interest rates earlier and with a larger amount to support the US economy.
Despite the protection policy, such as Trump tariffs, often tends to support the dollar, the dollar has been defeated by a prolonged sales wave due to uncertainty related to the US economy.
The Fed's March meeting must be published later on Wednesday and, as expected, will be given many tips on monetary policy.
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