Asia equities extended a global rally on Tuesday, with the US decision to no longer designate China a currency manipulator a further sign of easing tensions between the economic titans.
The Treasury announcement came days before the two sides are due to sign off on the first part of a wider trade agreement that has helped fan a rally in world markets. It also led to a sell-off in safe-haven assets with the yen at a seven-month low and gold down almost one percent, while oil was also struggling with the US-Iran flare-up seemingly in the rear window for investors.
Asia was given a firm lead from Wall Street, where all three main indexes ended higher—with the Nasdaq and S&P 500 hitting fresh records—on reports the US was about to remove the manipulator label from China.
Donald Trump accused Beijing in August of weakening its yuan currency “to steal our business and factories”, re-stating a long-standing grievance.
But soon after the end of trade on Monday, the Treasury said in its semi-annual report to Congress that the unit had strengthened and Beijing was no longer keeping it artificially weak.
The yuan jumped more than one percent at one point Tuesday before easing slightly. The currency is up more than four percent from an 11-year low touched in September.
“The yuan is the purest and best barometer to gauge the market’s view on US-China trade tension,” said AxiTrader’s Stephen Innes. “With the yuan strengthening ahead of the ‘phase one’ deal signing, it’s indicating the potential for further improvement in trade relations.”
The US reversal of China’s status as a manipulator “is a most precise and definitive de-escalation of trade tension to date and provides a less congested road as we pivot to phase two of the broader trade agreement”, he added.—AFP