Most Asian currencies fell on Wednesday on fresh worries about China-US ties as political unrest in Hong Kong became a new flashpoint in strained relations between the world’s two largest economies, knocking appetite for regional units.
The US House of Representatives on Tuesday passed new measures related to pro-democracy protests in Hong Kong, which would require the US secretary of state to certify every year the Hong Kong was retaining its autonomy.
The legislation would damage China’s relationship with the United States if it becomes law, China’s foreign ministry said on Wednesday, adding to the stress of already difficult trade negotiations between Washington and Beijing.
“Final passage of the bill would draw the ire of the Chinese government and probably reduce any chances of a US China trade deal, even a mini one,” said MUFG Bank in a report.
“This outcome would be negative for financial markets and have more negative implications for global trade, particularly Asia-ex Japan.”
Hong Kong has been rocked by massive marches and at times violent protests involving teargas, petrol bombs and live rounds, over concerns Beijing is tightening its grip on the city and eroding democratic rights.
Beijing rejects the charge and accuses Western countries, like the United States and Britain, of stirring up trouble.
Also weighing on sentiment was waning optimism about a breakthrough in US-China trade negotiations with earlier news about both sides reaching a first phase of a new deal failing to yield any concrete details.
Bloomberg reported that China would struggle to buy $50 billion of US farm goods annually unless it removes retaliatory tariffs on American products, which would require reciprocal action by US President Donald Trump.
China’s yuan fell 0.2 percent on Wednesday after its central bank set the midpoint at its weakest level since Sept. 12, 38 pips lesser than Reuters’ estimate of 7.0708.
“This USDCNY fix was telling, as it serves to reinforce the message of potential retaliation should the US Congress continues to act in support of Hong Kong protesters,” Maybank said in a note.
The Indian rupee also dropped on worries over its economy after the International Monetary Fund (IMF) cut its growth projection to 6.1 percent from 7 percent on concerns over corporate and regulatory uncertainty. – Reuters