Moody's: US labelling of China as currency manipulator likely to escalate trade tensions

Eren Sengezer FXStreet

The United States' labelling of China as a currency manipulator is likely to escalate the trade tensions, according to ratings agency Moody’s.

"Heightened tensions point to risk that the US will further increase tariffs on Chinese imports and Beijing will make retaliatory responses," Moody's said, per Reuters. "The currency manipulator designation by the US is unlikely to have a material impact on China's foreign exchange policy."

These comments seem to be allowing the markets to remain risk-averse. As of writing, the 10-year US Treasury bond yield was down 2.95% on a daily basis. Below are some additional key quotes from Moody's publication.

"Worsening trade and currency tensions between the US and China will curb global growth."

"The US Increasing tariffs on Chinese imports raises the prospect of slower economic expansion in 2020 than 6.0% for China, 1.7% for the US."

"Market expectations of further declines in renminbi may lead to devaluation in other currencies, particularly ones with strong trading ties with China."

"Out of Asian emerging economies, Indonesia's credit quality could come under pressure in event of any prolonged local currency depreciation."

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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