During the first week of August 2019, China devalued its currency to drop below its 7-to-1 ratio with the U.S. dollar for the first time in ten years. The announcement caused U.S. stocks to plummet, ending in the worst day of the year so far with the Dow down 767 points.
Many are worried and analysts are paying close attention to what could be a currency war between the United States and China. President Donald Trump has put pressure on the Chinese economy with increased tariffs with the potential to increase them even more.
Tensions are running high on Wall Street as investors are anxiously waiting to see what happens as the yuan is devalued. There’s a chance that Trump may choose to devalue the dollar in reaction to China’s move.
FX and global macro strategist at Arkera Viraj Patel tweeted, “If this was an all-out currency war– the U.S. would hands down lose. Beijing [is] far more advanced in playing the currency game [and has] bigger firepower.”
Trump, on the other hand, is calling China’s announcement a “major violation” and has continued to attack the country’s currency policy. Meanwhile, China has reacted by pausing purchases of agricultural goods from America.
The worst day of the year follows the S&P 500 and Nasdaq Composite’s worst week of the year, with technology stocks taking the biggest hit, including Apple, Intel, and Microsoft.
Asian markets also fell today, by more than 1.6% amid Chinese protests. China’s central bank announced that they weakened the yuan in reaction to “trade protectionism and new tariffs on China.”