China's yuan could weaken past 7.5 per dollar if Trump hikes tariffs further, strategist warns - CNBC

U.S. banknotes and Chinese yuan notes.

Paul Yeung | Bloomberg | Getty Images

The yuan may weaken beyond 7.5 against the U.S. dollar if President Donald Trump kicks tariffs up to 25% on the recently threatened $300 billion of Chinese goods, says Bank of America Merrill Lynch.

China's currency has gotten greater attention in recent days after Beijing allowed the yuan to weaken past the important psychological level of 7 per dollar for the first time since the global financial crisis.

That depreciation came after Trump threatened to slap 10% tariff on $300 billion of Chinese goods starting Sept. 1. If that goes ahead, the U.S. dollar-Chinese yuan exchange rate may touch 7.3 by the end of 2019, weaker than an earlier forecast of 6.63, the BofAML predicted.

If that tariff rate increases to 25%, "you'll be looking at CNY beyond 7.5 levels" assuming existing economic and financial conditions don't change, Rohit Garg, a currency and rates strategist at the bank, said Wednesday.

China's move tells you that the U.S. doesn't have all the balls in this game, the Chinese can mess up this dollar weakening desire of Donald Trump very easily.

Taimur Baig

chief economist, DBS

Many analysts have said they expect Trump to hike tariffs on all Chinese goods to 25% after the recent escalation in the U.S.-China fight. Such an elevated tariff rate would hurt sentiment further and the U.S. Federal Reserve would likely step in to stem some negativity, Garg told CNBC's "Squawk Box."

The Fed "would sound more dovish, it would actually go ahead and cut rates," he said. That means it may be "difficult for the dollar to actually rally as much," he added.

Washington has already applied a 25% tariff on $250 billion of Chinese goods and labeled China a currency manipulator as the two economic giants battle in areas of trade, technology and now foreign exchange. For its part, Beijing imposed elevated tariffs on billions of dollars of U.S. goods and said it will stop buying American agriculture products.

US dollar strength

The U.S. has for years accused China of keeping the yuan artificially low to gain advantage in trade — an issue Trump has been complaining about since he became president. Last month, Trump suggested the U.S. should "MATCH" the "big currency manipulation game" taken by China and Europe.

But by ratcheting up rhetoric and tariffs against China, Trump has caused the U.S. dollar to strengthen even more compared to the yuan and other currencies, said Taimur Baig, chief economist at Singaporean bank DBS.

The U.S. dollar index — which measures the greenback against a basket of six currencies — has risen by around 1.4% this year.

"That's the irony of it all: The more grenades Donald Trump throws to give the U.S. a competitive advantage, the more risk off we see and more safe haven flows go into the U.S. and Treasury rallies and the dollar remains strong," he told CNBC's "Squawk Box" on Wednesday.

The Fed lowering interest rates or Washington intervening in the currency markets could help to contain the greenback's strength, but both options "will have far less impact on the dollar than just the end of the trade war," said Baig.

"If there were some sort of resolution that the actions between the Chinese and Americans will lead to a smaller surplus between the U.S. and China, to me, that would be the most powerful driver of a weaker dollar," he said.

"But that is not at all the way the narrative is playing out right now," he added. "China's move tells you that the U.S. doesn't have all the balls in this game, the Chinese can mess up this dollar weakening desire of Donald Trump very easily."

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2019-08-07 07:03:35Z
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China's yuan could weaken past 7.5 per dollar if Trump hikes tariffs further, strategist warns - CNBC

U.S. banknotes and Chinese yuan notes.

Paul Yeung | Bloomberg | Getty Images

The yuan may weaken beyond 7.5 against the U.S. dollar if President Donald Trump kicks tariffs up to 25% on the recently threatened $300 billion of Chinese goods, says Bank of America Merrill Lynch.

China's currency has gotten greater attention in recent days after Beijing allowed the yuan to weaken past the important psychological level of 7 per dollar for the first time since the global financial crisis.

That depreciation came after Trump threatened to slap 10% tariff on $300 billion of Chinese goods starting Sept. 1. If that goes ahead, the U.S. dollar-Chinese yuan exchange rate may touch 7.3 by the end of 2019, weaker than an earlier forecast of 6.63, the BofAML predicted.

If that tariff rate increases to 25%, "you'll be looking at CNY beyond 7.5 levels" assuming existing economic and financial conditions don't change, Rohit Garg, a currency and rates strategist at the bank, said Wednesday.

China's move tells you that the U.S. doesn't have all the balls in this game, the Chinese can mess up this dollar weakening desire of Donald Trump very easily.

Taimur Baig

chief economist, DBS

Many analysts have said they expect Trump to hike tariffs on all Chinese goods to 25% after the recent escalation in the U.S.-China fight. Such an elevated tariff rate would hurt sentiment further and the U.S. Federal Reserve would likely step in to stem some negativity, Garg told CNBC's "Squawk Box."

The Fed "would sound more dovish, it would actually go ahead and cut rates," he said. That means it may be "difficult for the dollar to actually rally as much," he added.

Washington has already applied a 25% tariff on $250 billion of Chinese goods and labeled China a currency manipulator as the two economic giants battle in areas of trade, technology and now foreign exchange. For its part, Beijing imposed elevated tariffs on billions of dollars of U.S. goods and said it will stop buying American agriculture products.

US dollar strength

The U.S. has for years accused China of keeping the yuan artificially low to gain advantage in trade — an issue Trump has been complaining about since he became president. Last month, Trump suggested the U.S. should "MATCH" the "big currency manipulation game" taken by China and Europe.

But by ratcheting up rhetoric and tariffs against China, Trump has caused the U.S. dollar to strengthen even more compared to the yuan and other currencies, said Taimur Baig, chief economist at Singaporean bank DBS.

The U.S. dollar index — which measures the greenback against a basket of six currencies — has risen by around 1.4% this year.

"That's the irony of it all: The more grenades Donald Trump throws to give the U.S. a competitive advantage, the more risk off we see and more safe haven flows go into the U.S. and Treasury rallies and the dollar remains strong," he told CNBC's "Squawk Box" on Wednesday.

The Fed lowering interest rates or Washington intervening in the currency markets could help to contain the greenback's strength, but both options "will have far less impact on the dollar than just the end of the trade war," said Baig.

"If there were some sort of resolution that the actions between the Chinese and Americans will lead to a smaller surplus between the U.S. and China, to me, that would be the most powerful driver of a weaker dollar," he said.

"But that is not at all the way the narrative is playing out right now," he added. "China's move tells you that the U.S. doesn't have all the balls in this game, the Chinese can mess up this dollar weakening desire of Donald Trump very easily."

Let's block ads! (Why?)

https://www.cnbc.com/2019/08/07/chinese-yuan-may-weaken-past-7point5-per-us-dollar-on-25percent-tariff-bofaml.html

2019-08-07 07:02:55Z
52780345840537

Trade war rhetoric between U.S. and China eases Tuesday as Beijing revalues yuan - CBC News

Disney Is Rebooting Home Alone And Night At The Museum - GameSpot

Disney has announced plans to reboot the Home Alone and Night at the Museum movie franchises--but a lot of the specifics are unknown at this stage. During an earnings call today, CEO Bob Iger confirmed that Disney will reboot Home Alone, Night at the Museum, Cheaper by the Dozen, and Diary of a Wimpy Kid for the new streaming service Disney+.

These are all 20th Century Fox franchises that became Disney franchises when Disney bought the majority of Fox's entertainment assets for a staggering $71.3 billion.

"We're also focused on leveraging Fox’s vast library of great titles to further enrich the content mix on our [direct to consumer] platforms," Iger said, according to The Hollywood Reporter.

Iger did not say if these will be movies or TV shows. The Night at the Museum series is the biggest of the bunch, bringing in $540 million in the US alone across multiple entries. The Home Alone series follows with $490 million in domestic box office receipts.

Before Disney bought Fox, it was reported that Ryan Reynolds was making an R-rated version of Home Alone called Stoned Alone for Fox. In this movie, Reynolds misses his flight and then goes home and gets baked.

He becomes paranoid when he hears someone breaking into his house. Someone actually is, and then Reynolds must defend his home while stoned. It sounds wonderful, but it's unknown if the project is still in motion now that Disney--a family friendly company--owns Fox.

Disney+ launches in November, priced at $7 USD per month. Disney also today announced a value option that bundles Disney+ with ESPN+ and Hulu for $13/month USD.

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August 07, 2019 at 07:31AM

Dow Implodes After China Bares Its Trade War Fangs - CCN Markets

[unable to retrieve full-text content]Dow Implodes After China Bares Its Trade War Fangs  CCN Markets

The Dow Jones is getting pummeled again, down 721 points (2.72%) as a significant global move from risk comes on the back of a *fresh* escalation in Trump's ...

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August 06, 2019 at 12:29AM

Trump risks losing the Fed as a recession scapegoat - BNNBloomberg.ca

The markets have spoken. If they are to be believed, the potential for a U.S. recession has never been greater in the post-crisis era than it is right now.

That’s a problem for President Donald Trump because after the events of the past few days, it should be clear that he has effectively forfeited the ability to use the Federal Reserve as a scapegoat for any economic slowdown, an angle he was clearly prepared to play.

Consider the three-month, 10-year U.S. yield curve, which, when inverted, is widely considered a signal of an impending recession. It inverted by as much as 32 basis points on Monday, the most since 2007. But what’s more notable is how it got there. On July 31, when the Fed decided to lower its benchmark short-term rate for the first time in more than a decade, the spread only moved a few basis points. But on Aug. 1, when Trump announced additional tariffs on Chinese goods, it spiraled down about 14 basis points. On Monday, as China detailed plans for retaliation, it fell as much as 10 basis points.

Some even fear that easier monetary policy from the Fed won’t be enough to reverse the damage, given the already shaky status of corporate earnings.

It truly didn’t have to be this way. Fed Chair Jerome Powell was convinced that the central bank’s rate cut was a mere “mid-cycle adjustment” that made sense as an offset to trade tensions, which he said were causing “ongoing uncertainty” among the central bank’s business contacts. In his opening statement, he said: “After simmering early in the year, trade policy tensions nearly boiled over in May and June, but now appear to have returned to a simmer.”

Less than 24 hours later, Trump ratcheted up the temperature. That fueled speculation that he made the move in response to the Fed cutting interest rates by less than he wanted. If this was a calculated move on Trump’s part, he might have underestimated how his decision could backfire.

To many market observers, the Fed didn’t have to lower interest rates last month. Powell even said that the central bank was as close to its dual-mandate of low unemployment and stable prices as ever. I argued that officials cherry-picked their data, but coming out of the Federal Open Market Committee decision, it seemed quite clear that the rate cut was mostly meant as a way to neutralize any lingering effects of Trump’s various trade skirmishes on business confidence.  

Trump should have taken the victory. After all, he had spent months hammering the Fed for raising interest rates too quickly and for continuing with “quantitative tightening,” which the central bank also ended last week. He got what he wanted, all the while preserving his argument that the economy would be doing even better if Powell hadn’t fumbled it. He had his scapegoat.

Now, Trump risks absorbing all that blame himself. To be sure, it’s still too soon to say a U.S. recession is coming anytime in the near future. And while stock markets took a serious beating on Monday, the S&P 500 is still up more than 20 per cent from its lowest point on Dec. 26. There’s no way to know for sure that this round of tariffs is “the one” that topples the global economy. The number of head fakes, both positive and negative, is too high to count at this point. Plus, investors have it in the back of their minds that Trump will strike some semblance of a deal before November 2020 to boost markets — and his re-election prospects. 

That’s a dangerous scenario to count on, especially because it takes two to strike a deal. China may see little upside to giving Trump a victory ahead of the presidential elections or might even prefer to gut it out and negotiate with a potential Democratic successor. This has always been a risk, of course. But as Powell pointed out, it had seemed as if the two sides were coming closer to an agreement. Trump shattered that illusion in one fell swoop. To escalate things further, the U.S. Treasury Department, "under the auspices of President Trump," officially labeled China a currency manipulator late on Monday.

My Bloomberg Opinion colleague Ramesh Ponnuru made the point recently that the Democratic presidential candidates faced a challenge in talking about the economy because it has been so strong. On top of that, as Powell likes to point out, sustaining the expansion has allowed the recovery to reach a broader subset of Americans.

Trump’s decision to impose further tariffs on China provides an opening for Democratic candidates. Indeed, California Senator Kamala Harris already did so, before this latest escalation. “Jerome Powell just dropped the interest rates and he admitted why — because of this so-called trade policy that this president has, that has been nothing more than the Trump trade tax,” she said on July 31. The president could have easily brushed off the attack at the time. But now? 

One bad day in the markets doesn’t mean a recession will follow. But it does speak to whom investors fear the most when it comes to mishandling the economy.

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August 06, 2019 at 05:00PM

Transat slams Group Mach offer as 'highly abusive' and files complaint with regulator - Yahoo Sports