Asian markets slumped on Tuesday after a currency war erupted between the United States and China, triggering the worst Wall Street sell-off of the year.
As investors fretted over Sino-US trade war fears, US President Donald Trump formally designated Beijing as a currency manipulator.
After Monday’s sharp fall in the Chinese yuan’s value against the dollar.
Tensions have escalated since Trump last week vowed to impose fresh tariffs on Chinese goods from September 1, which would subject virtually all of the US$660 billion in annual trade between the world’s two top economies to punitive duties.
On Monday, the yuan dropped to its lowest level to the dollar since the global financial crisis in 2008. This fueled speculation that Beijing was devaluing its currency to support exporters and offset Trump’s latest threat to hit $300 billion in Chinese exports with 10% hike in tariffs.
“Continued yuan depreciation should be expected, albeit at a staggering pace,” Edward Moya, a senior market analyst at global forex group OANDA, said.
“Currency wars are taking center stage [and] Beijing is likely to tolerate further weakness,” he added. “We could see another 5% before the end of the year.”
Naturally, the uncertain outlook spilled over into Wall Street with the blue-chip Dow Jones Industrial Average plunging 2.9% on Monday in the worst session of the year. The broad-based S&P 500 was also hot, dropping 3.0% while the tech-rich Nasdaq tumbled 3.5%.
The outlook remained grim in Asia on Tuesday with Tokyo opening nearly 3% lower before recovering to end the morning 2%.
Hong Kong fell 2.4% while Shanghai and Sydney shed 2.6%. Manila and Wellington were also down around 2%.
– reporting by AFP