(ATF) – US stock futures nosedived after Trump spoke of two more weeks of heightened pain at his daily COVID-19 briefing Tuesday. The rout has continued since and Dow futures were down 3.26% at 9pm HK time.
Renewed financial stress engendered renewed dollar strength; the DXY was up 0.61% to 99.6520 at the end of the Asian trading day.
In line with dollar strength, the Chinese currency, which had been set at a central parity rate of 7.0771 at the morning fixing, weakened to 7.10 at 9pm HK time.
As we have pointed out repeatedly, we’re watching a de facto yuan dollar peg.
Some good economic news from the Caixin PMI, which focuses on SMEs, confirmed the upbeat reading of the large official Chinese, mainly state-owned-enterprise PMI yesterday. Modest Chinese recovery allows the central bank to cozy up to the greenback without fear of negative consequences.
One note of caution: We’ve learnt from sources we trust that further Chinese rate cuts in various categories are coming. This might portend a CNY breakout above the 7.05-7.10 range.