China and Hong Kong Markets – The Trade War

Ever since the trade war between China and the US began, there has been a lot of market uncertainty. As a result, there have been a ton of transactions between the Chinese Yuan and the American dollar, more so in the past few months. Many businesses and investors in the Chinese market are looking to buy into the dollar that seems to be strengthening by the day as a way to shield their assets from the looming foreign exchange risk. As they do this, there have been many speculations that the Chinese authorities are also looking for ways in which they can defend their currency, and this has also increased trades.Currency traders have confirmed reports that major state-owned banking institutions were working towards selling dollars so that they could defend the Yuan.

Most trades between the dollar and the Yuan take place on the spot market where they exchange soon after the deal takes place. However, they also take place in the case of futures trading where parties agree to carry out the transaction at another date at a set price. Traders are also looking into ways in which they can benefit from these transactions as they take into account the risks that come about in futures trading. Commodity traders have increasingly expressed interest in hedging the risks to which they are exposed owing to the ongoing tariff battle.

The People’s Bank of China is responsible for controlling the price of the Yuan within the mainland borders. However, the value of the currency while in the markets is beyond their control. Both values have declined in the past months regarding the dollar. At present, the dollar has witnessed an increase of 7 percent in comparison to the Yuan. As this takes place, centers of dollar-yuan currency futures have reported an increase in volumes, more so in Singapore and Hong Kong. This increase is expected to keep soaring as investors find means by which they can protect their interests as the war continues.

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