Jakarta, 18 September 2018 – Confirmation that President Trump has imposed tariffs on an extra $200bn of Chinese goods has encouraged further risk aversion across the markets as expected. The Dollar has once again strengthened on increased trade tensions, while a wide basket of different emerging market currencies is once again on the back foot due to a lack of risk appetite for emerging market assets.
This move will make investors more sensitive to the ongoing uncertain external environment and I would expect those currencies belong to markets with weaker external positions to be hit hardest in the aftermath of this decision. This probably means another blow for the likes of the Indian Rupee, Indonesian Rupiah and South African Rand.
The outcome is negative for the Chinese Yuan, however it has been priced in throughout recent weeks and the reaction in the Yuan has not been as negative as would have been first feared. The Yuan is down just over 0.10% at time of writing.
The Malaysian Ringgit and Indonesia Rupiah are examples of two Asian currencies that are trading more negatively than the Yuan, in reaction to this news.