Trade tensions have risen. No doubt about it, but to consider this a trade war is premature. We should not pretend that this is the first time that the US adopted protectionist measures that ensnarled are military allies.
We have been to this dance before. Countries will respond with some symbolic retaliation on a small number of goods that make a little more than a rounding error in bilateral trade, take some measures to ensure that the defection of the US does not lead to an import surge, and appeal to the conflict resolution mechanism at the WTO.
Being in Hong Kong as this two-week business trip winds down, I had the privilege of visiting with Yvonne Man at Bloomberg and tried to lay out this less emotive read of developments. Here is a 90-second clip.
In terms of the price action, the dollar was slipping through the JPY105 level in early Asian turnover. I suggest to Yvonne that a convincing break of it would target JPY100.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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