To get around tariffs, weaken your currency
The USDCNH (offshore yuan) has been moving higher over the the last 3 or so weeks. Today, the price moved above its 200 day MA (green line at 6.8261). The high reached 6.8636. From the low in April, to the high today, that is a move of 2.78%. That won’t erase a 15% tarriffs on China exports but it helps. PS from the March 2018 low, the move to the high today is 10.06%.
Now, part of the “deal” with China is a stable currency. China has long been accused of manipulating their currency to the downside, making Chinese goods cheaper abroad (i.e. in the US). Is the run up over the last few weeks, a way to get back at the tougher US trade representatives? Could be. They don’t like to be told, legislated by a foreign entity (they lose their sovereignty). Weakening there currency is one option. Another option might be to not show up for some treasury auctions, forcing rates higher, hurting the US economy. Of course, that has painful implications for China as well (they own a bunch of US debt and need a strong US economy for their exports too).
Anyway, it will be of interest to see how the USDCNH performs in the near term. Is the move higher the start of a new trend to the upside, or just a blip? Watch the 200 day MA for clues. Move below, and there may be a rotation back down towrad the floor area (see red numbered circles).