Asia FX Weakens Amid China Trade Jitters; Yen Rally Stalls

Overview

Asian currencies weakened against the U.S. dollar on Tuesday as investors grew jittery over the possibility of a prolonged trade war between China and the United States.

The Japanese yen's rally against the dollar also stalled, as investors booked profits and as the dollar found support after hitting a two-week low on Monday.

Key Points

• The Chinese yuan fell to its lowest level against the dollar since December 2017.
• The Japanese yen gained 0.2% against the dollar to 106.95 yen.
• The South Korean won fell 0.4% against the dollar to 1,126.5 won.
• The Taiwan dollar fell 0.3% against the dollar to 30.295 Taiwan dollars.

Analysis

The weakness in Asian currencies came as investors grew concerned about the possibility of a prolonged trade war between China and the United States.

The United States has already imposed tariffs on $250 billion worth of Chinese goods, and China has retaliated with tariffs on $110 billion worth of U.S. goods.

There are fears that the trade war could escalate further, which would hurt economic growth in both countries and damage global trade.

The yen's rally against the dollar stalled as investors booked profits and as the dollar found support after hitting a two-week low on Monday.

The dollar has been under pressure in recent weeks due to concerns about the global economy and the Federal Reserve's interest rate policy.

However, the dollar found support on Tuesday as investors sought safety amid the uncertainty surrounding the trade war.

Outlook

The outlook for Asian currencies is uncertain, as it depends on the outcome of the trade war between China and the United States.

If the trade war escalates, Asian currencies could weaken further as investors seek safe-haven assets such as the dollar.

However, if the trade war is resolved, Asian currencies could rebound as investors return to riskier assets.