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US-China Tariffs and CNY Stability: Navigating USD/Asia Risks
The US has added 10% tariffs on China twice this year, and, contrary to expectations that tariffs should result in a weaker CNY, spot USD/CNY has drifted lower from 7.33 pre-inauguration to around 7.25 currently. We attribute this to a few factors. The broad USD itself has weakened, Chinese asset markets outlook has improved, and most importantly the CNY fix (which is a policy signal tool) has been stable at around 7.17, thereby restraining the movement in spot USD/CNY.
