What will happen if we see 7Rmb on USDCNH - trade war talk

[trade247]

We’ve seen the kneejerk reactions to trade tariffs and war talk rhetoric, in some instances **** for tat plays from both sides to maintain political face, and whilst the initial volatility spikes seemed to be over it looks like we’ve shifted to a new horizon - one where the actual fall out of these tariffs is coming into play.

The narrative over the last couple of weeks (and arguably months of you wanted to get back to the heart of it) has been political interventionism to counteract some of the effects. As reported over the weekend and seen on Monday the movement towards the 7Rmb to the dollar price action is getting ever so close! A couple of commentators have said that they expect Beijing is intentionally devaluing their own currency in an effort to buoy exports (essential for china’s high export economy). US Treasury secretary Steven Mnuchin even confirmed that they’re monitoring the devaluation and have even gone as far as to warn China over this. Ahhhh the US. Forever the worlds interventionist (but low behold anyone who offers an opinion on dehhh freeeedom)

But what about the effect of the dollar? And what are the main markets to watch which could see some movement going forwards? I’d be interested in a few other people’s thoughts on this. I guess we’d be looking at

• USDRMB of course - I'm thinking we'll see it hit and then a pretty solid move past it.
• Industrials which point to economic strength such as copper, steel and zinc
• ...and also miners who’s share prices are so intrinsically linked to that.
• ...which would lead into commodity centric indices such as the ASX, or funds which link to these assets.
• Emerging markets who rely on exporting to China

Edited October 10, 2018 by cryptotrader

[Caseynotes]

Hi @cryptotrader,  as one economy is booming while the other is crashing China is discovering the folly of prolonging an argument with your biggest customer, no business can sustain that for very long, concerning China all Trump has to do now is sit and wait, the ball/problem is firmly in China's court. Due to the potential knock on effects you point out China will have to come to some sort of resolution.

As an aside, I saw a graph a few days ago of plummeting new car sales which shows the degree to which people are now directly affected in China.

[Mercury]

I don't trade or look at CNH pairs @cryptotrader for 2 reasons: not enough historic data on the IG charts for me to get a long term handle on it; don't like to trade currencies where there is a high degree of central government control (e.g. like the CHF peg to the EUR).  The latter point is the real issue here, the Chinese government can and will do whatever they like.  All of them can and do in a crisis of course (e.g. the US government making it illegal to own physical gold in the past so they could mop up all the gold in their economy to bolster the economy...).

I don't think many people will be flocking to buy CNH during a crisis, how can you trust a communist dictatorship to honour the bearer nature of their paper?  Therefore if we are right about am impending global financial crisis the USD is the place to be, it is still the worlds reserve currency.  Frankly it USD fails us there is no hope (physical gold maybe...).

[Mercury]

Agree @Caseynotesand let's not forget that from a consumer point of view China is an emerging market, albeit a very very big one, and we all know what happens to emerging markets during a financial crisis... 

[Caseynotes]

Plummeting consumer confidence hits housing market in China. >...