The equity rally left the FX market behind—the tension between the United States and China, especially Hong-Kong, drag on people’s moods. The New Zealand dollar and the Australian dollar were pressured. Offshore yuan hovered near a record low.
Asian currencies were caught in a crosscurrent between rising tensions between the United States and China. Thus, on Thursday, the dollar held its own. After coronavirus lockdowns, economies have re-opened. Therefore, there is optimism concerning the recovery of global growth.
There is an escalating war of words between the world’s two largest economies. This put tremendous pressure on the yuan. It spilt over into the Antipodean currencies because the mood turned cautious in comparison to ebullience in equities markets.
Hong Kong is the newest flashpoint. Mike Pompeo is the US Secretary of State. On Wednesday, he said that China’s plan is to impose laws; these were only the latest in a series of actions. Thus, those actions fundamentally undermine the autonomy of the city and its freedoms.
Dollar and Others
The yuan is a barometer of relations between China and the United States. On Wednesday, in foreign trade, it hit a record low of 7.1966 per dollar. On Thursday, it held close to that level at 7.1852.
In the London session, the kiwi and Aussie backed off two-month highs hit. Thus, as sentiment soured during Asian trade, they fell in value. The New Zealand dollar was last down at $0.6174, and the Australian dollar decreased by 0.5% at $0.6592.
Jason Wong is a senior market strategist at BNZ in Wellington. He said that, overall, the macro story is hard to ignore, and things are picking up.
Nevertheless, Down Under, China is an integral part of the market’s driver. Markets wait for China’s response. They are currently feeling caught in the middle.
The situation in Hong Kong on the ground was strained, but calm. Riot police were deployed throughout the city.
