- Higher Yuan will impact on Chinese exporters
- Exports will recover in long run
Chinese authorities fixed the Yuan at a provocatively weak level today despite the USD/CNY market trading at 17 year lows. This allied with the very strong industrial profits figures out of China would seem to suggest that the odds of some sort of tariff actions by the US against Chinese products is increasing. Such action would have less impact now than it would have had 3 years ago as China is now exporting much more to other markets and it’s own domestic economy has also grown very sharply.
Nevertheless, any tariff action would lead to a knee-jerk reaction in the FX market with a sharp sell-off in the AUD being the likely short-term outcome.
