US Dollar & Chinese Yuan: Which Currency To Rise as Tariffs Go Live?

The US dollar and the Chinese yuan are having a face-off in April as Trump’s tariffs are set to go live on Wednesday. The broader currency market is in limbo as it faced dramatic changes since Trump took office in January. In addition, the global imports and exports sector is bracing for turbulence as several goods face tariffs. The trade wars are causing an imbalance in the exchange of goods leading to businesses incurring losses.

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On the heels of the tariffs, the Chinese yuan briefly weakened against the US dollar on Tuesday. The markets await more details on Trump’s tariffs as the US is slapped with reciprocal tariffs by other countries. The sentiments are fragile leading to the DXY index, staying put at the the 104.20 mark. The US dollar has declined nearly 4.5% year-to-date and is down against eight out of nine leading currencies.

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Trade Wars: The US Dollar vs Chinese Yuan Amid Global Tariffs

The Chinese yuan could weaken against the US dollar as Trump’s tariffs hit the markets on Wednesday. China exports billions worth of goods to the US and the companies now need to shell out more to reach American consumers. While some businesses in the US are absorbing the tariffs, some are placing it on the shoulders of consumers. T-shirts have become costly in the US as the majority of them come from China.

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Several currency analysts have predicted that the US dollar is in a consolidation phase against the Chinese yuan. When the dust settles on the tariffs, the DXY index has more chances of heading north than any other currency. Forex investors are buying the dip on the USD as its now available at discounted prices. Taking a long position now when the currency markets recover could boost profits as the DXY index surges in value.