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Forex Technical Trade Note Outlook Update - 8 August 2019


With China adding a new dimension to the now-famous tit for tat tariff disputes, weakening the Yuan might neutralize President Trump's next wave of tariff increases. For those not in the know, The U.S Treasury Department accused the Chinese of currency manipulation. This after the Chinese government weakened the Yuan to try and neutralize the new round of tariffs.

  • The Chinese government dictates how much Yuan each U.S Dollar is worth unlike the rest of the world where the free market decides how much a dollar is worth. The Chinese central bank sets the rate every day.

The latest on the currency front on Thursday is that the Peoples Bank of China (PBOC) fixed the Yuan at a much higher than expected rate. The central bank of China's reasoning is that they are trying to prevent panic and to stabilize the Yuan in the near term.

The Yuan daily rate was set above 7 for the first time on Monday since 2008, and the currency has now weakened to its lowest point since 2015 against a basket of its peers.

CNYMUSD Index GT247 Bloomberg

Source - Bloomberg

The Rand (ZAR)

Despite the strong correlation between the Yuan (CNH) and Rand (ZAR), the local South African currency has held up nicely and has strengthened to below R15.00/ USD. Considering the strong economic ties, South Africa has with China. This might be short-lived if the trade disputes continue and notwithstanding the local economic pressures SA Inc. is facing.

USDZAR Curny GT247 Bloomberg

Source - Bloomberg


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