The unmitigated disaster that is the US Trump administration’s pathetically failing fight against the coronavirus weighed on US stocks overnight.
Reports of new virus outbreaks from Japan to Hong Kong to Thailand in East Asia and the worsening situation in India, now number three in confirmed cases in the world verging on one million, saw major Asian markets swoon on Tuesday.
None of that will help Donald Trump’s faltering re-election efforts. So what does he do? What any Trump-type losing gambler does, double down on a losing bet.
Overnight, he trotted out his most trusted lieutenant, Secretary of State Mike Pompeo, to announce that the US now sides with any and all with South China Sea territorial claims against China.
The issue, right or wrong, will go nowhere … unless Trump wants it to, which, of course, cannot be ruled out. And since it can’t be ruled out, markets figured it in as another negative.
But the US and renewed East Asian virus concerns are real and are moving securities and currency markets, not just the ever-so-smart game-theory aficionados on Trump’s team.
Currencies tend to react to ascertainable economic realities and that’s what we saw in the Asian trading day today.
The PBoC set Tuesday’s central parity of the yuan at 6.9996, barely changed from 6.9965 on Monday. As the day wore on and stock markets trended down, the yuan went the same direction and stood at 7.0175 at 7pm HK time, down from 7.0100 at 3pm.
The move down was subdued. China recorded sub-ten new virus cases yesterday. The new clusters in Japan, HK, and Thailand look containable. The economic consequences will be tolerable.
The Hong Kong dollar – under pressure last Friday as the carry trade supporting it and speculatively driving it higher faded – presently trades at 7.7508, a tad higher than the 7.7509 open.
Bloomberg, meanwhile, without explaining or bothering to comment on its ill-considered HKD-negative “analysis”, blandly said that the alleged and – ah, so much feared – US attack on the HKD peg to the USD, had found no serious takers in the Trump administration and was for now … well, just over.
So much for insightful reporting.
The HKD stands at 7.7508, near the top line of the 7.75 intervention limit.
This report appeared first on Asia Times Financial.