Yuan Nears Record Low: The Impact of Trump Tariffs on Asian Currencies

USD/CHN Daily Chart

Trump’s announcement of additional tariffs on China, Canada, and Mexico has caused significant volatility in Asian currencies. The Chinese yuan has approached a record low in offshore trading, while other trade-dependent currencies like the Korean won and Singapore dollar have also weakened. Meanwhile, the U.S. dollar has strengthened, hitting a one-month high, driven by strong inflation data and expectations of prolonged high-interest rates from the Federal Reserve.

China has vowed to retaliate against the tariffs and is expected to implement large-scale stimulus measures to mitigate the economic impact. However, analysts warn that Trump’s aggressive tariff policies could signal further tariff hikes in the coming months, heightening global trade tensions and market uncertainty.

Future Outlook and Predictions

1. The Movement of the Yuan and Asian Currencies
   The yuan is expected to face continued downward pressure in the short term due to a stronger dollar and the impact of tariffs. However, China’s likely implementation of large-scale economic stimulus measures to counteract the effects of these tariffs could lead to a temporary rebound. Other Asian currencies, especially those from export-driven economies like the Korean won and Singapore dollar, are also at risk of further declines.
2. Strength of the US Dollar
   The dollar index continues to rise, suggesting a short-term dominance of dollar buying. With inflation data supporting the Fed’s high-interest rate policy, the dollar may strengthen further. However, the long-term impact of a stronger dollar on U.S. export competitiveness could lead to a correction phase.
3. Market Uncertainty and Risk Aversion
   In an environment of heightened uncertainty, investors are likely to shift to safe-haven assets. Gold and U.S. Treasury bonds may gain renewed attention as effective hedging instruments.

Beginner Investment Advice

The current market, characterized by a strong dollar and a weakening yuan, is an excellent opportunity for beginners to learn market dynamics and start trading. By using CFDs, beginners can start with a small amount of capital, adapt flexibly to market conditions, and turn short-term price movements into profit opportunities. Below are some specific tips to help beginners trade with confidence.

What should you do?

1. Focus on Dollar Buying for Short-Term Gains
   With the dollar likely to strengthen further, consider taking positions in USD/CHN or USD/JPY pairs. Monitor the charts carefully, and aim to buy when prices approach a support level.
2. Set Stop Loss to Manage Risks
   Always set a stop loss to protect against sudden market reversals. For example, setting it 1–2% below the purchase price helps to limit potential losses.
3. Develop a Habit of Chart Analysis
   Use tools like moving averages and trend lines, as shown in the attached chart, to understand market trends. Pay attention to whether the dollar’s bullish trend continues in the coming weeks.
4. Stay Updated on News
   Follow updates on Trump’s tariff policies and the Fed’s interest rate decisions. These factors significantly influence currency movements, helping you decide the best time to act.
5. Start Small and Gain Experience
   Begin with small amounts to familiarize yourself with the market. Learn from the trends in dollar strength and yuan weakness, and gradually increase your trading size as you build confidence.