Moody's expects chain reaction from US Treasury's yuan measure

Business | 6 Aug 2019 7:02 pm

Moody’s Investors Service said today the U.S. Treasury’s designation of China as a currency manipulator represents an escalation of the trade tensions and will likely contribute to a hardening of positions.

Martin Petch, vice president of the credit rating agency's sovereign risk group, said it also increases the likelihood that U.S. tariffs on Chinese products will rise beyond current levels, followed by further retaliatory measures by China.

"Unless negotiations between the U.S. and China resume rapidly, this latest development is likely to create negative spillover effects in both China, the US and globally, and particularly in Asia," Petch said.

"At this stage, we do not expect the U.S. Treasury designation to have a material impact on China’s foreign exchange policy. However, market expectations of potential further yuan devaluation may lead to devaluation in other currencies, particularly those with strong trading ties to China."

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