Starting of a currency war

Image collected
The US and China trade war has been going on for more than a year, and this war is now taking a new turn. The currency war has begun. Earlier this month, US President Donald Trump announced a 10 percent tariff on new $ 300 billion Chinese goods imports. In response, China reduced the rate of its own currency yuan against the dollar last week. On August 5, 1 dollar was equal to 7.05 yuan, the highest depreciation of the yuan against the dollar since 2008. In a tweet, Trump accused China of taking unfair advantage of the currency.

He also called China a "currency manipulator". This new war in the US and China has shaken the currency market. However, China says they have no desire to use the currency as a weapon in the trade war. The fall in the yuan is not a deliberate policy in Beijing. This new war between the US and China has shaken the currency market. However, China says that they have no desire to use the currency as a weapon in the trade war. The fall in the price of yuan is not an intentional policy of Beijing.

In a recent report, Merrill Lynch Global Research of Bank of America analyzed three scenarios of this Chinese yuan depreciation. 

The first one is that China's import from the United States is one-third of the US import from China. This means that it will not be possible for China to impose tariffs on as many products as the US is imposing tariffs on Chinese products. So depreciation of the currency is a great weapon for China now.

The second scenario is a nonstop stalemate - leaving the yuan unchanged. If the conflict is long-term, the Chinese currency's price may be kept within a range. Beijing will only depreciate and raise the currency once within that range. 

In the third scenario, Chinese currency can rise to a certain price. Because the yuan can be depreciated if needed. 

Meanwhile, Trump is trying to pull the scenario to his side. On August 19, Trump tweeted that the US economy is not going towards recession. The economy is incredibly good right now. However, it is sad that the dollar is so strong that other regions of the world are suffering.

In fact, Trump has been upset over the central bank for a long time with interest rates. Trump wants to reduce interest rates. The US central bank Fed, on the other hand, does not want it right now. Trump wants to put all the emphasis on increasing exports.

Indian rupee, Singaporean dollar, Korean won, Malaysian ringgit and Indonesian rupee have been affected by the yuan's depreciation this month. However, the value of the taka against the dollar has remained unchanged for quite some time. According to the Bangladesh Bank, 1 dollar is equal to 85.45 taka from the beginning of the current month. Later on August 20, it was 84.50 taka per dollar. On the other hand, UK pound prices are fluctuating a bit.

Tags :

Share this news on:

Previous Story

Trending Topics

Archive