Currency manipulator

The U.S. labels China a currency manipulator. Asian equities are poised to plunge after U.S. stocks got pummeled on China's yuan play. And Beijing will hold another briefing to address the unrest in Hong Kong. Here are some of the things people in markets are talking about today. Currency Manipulator The U.S. Treasury Department has officially labeled China a currency manipulator after the country's central bank allowed the yuan to fall below 7 per dollar in retaliation for new tariffs on its imports. Cowen's Chris Krueger called Beijing's retaliation "massive," noting "on a scale of 1-10, it's an 11." Morgan Stanley strategist Michael Zezas said tariffs are more likely to be enacted as pressure builds on the Fed to make deeper rate cuts. BMO strategist Ian Lyngen said the biggest unknown is how much further the yuan will fall. The currency's slide threatens to revive concerns about the capital flight that helped prompt the country to spend $1 trillion of its reserves in 2015. Poised to Plunge Asian equity futures suggest the bloodbath in stocks will continue after U.S. equities had their worst rout of the year on China allowing the yuan to tumble in retaliation to President Trump's tariff threats. The S&P 500 fell almost 3% from its recent record high, while the Dow plunged 767 points. Treasuries jumped, with 10-year yields falling about 11 basis points. Trump accused China of currency manipulation, and called on the Fed to respond. "Are you listening Federal Reserve?" the U.S. president tweeted. "This is a major violation which will greatly weaken China over time!" His trade battle with China is starting to look like a forever war—a quagmire with no end in sight. Unrest Continues Beijing will hold its second press briefing on Hong Kong in as many weeks on Tuesday, the SCMP reported. China lacks good options for handling unrest in the city and may ask for recommendations from a group of key residents to buy time, political scientist Ivan Choy said. The local government condemned as "violent acts" attacks on at least two police stations amid a citywide strike on Monday.  Crypto Calm Investors looking for a place to hide are finding an unlikely safe haven: Bitcoin. Securities such as sovereign bonds and gold rose as China fired back in the trade war, but so too did major cryptocurrencies. They're increasingly seen as a refuge during distressed times, with Bitcoin gaining more than 14% and smaller peers including XRP and Litecoin each rising more than 5%. The Swiss franc led G-10 currencies on traditional haven buying, which also sent gold higher. Central Bank Action The RBA will probably hold rates steady on Tuesday following back-to-back rate cuts, according to all analysts surveyed. While Governor Philip Lowe has left the door open for further easing, he'll wait to see how earlier actions filter through to the Australian economy, especially the rebounding property market, economists said. On Wednesday, New Zealand policy makers are expected to cut. What we've been reading This is what's caught our eye over the last 24 hours. North Korea fires more unidentified missiles. World's richest people lose $117 billion in the market meltdown. The outlook for Australia's retail stocks is gloomy. Vietnam won the trade war, but now it's in trouble.  Modi provokes Pakistan with the boldest Kashmir move in 70 years. Tech giants risk privacy probes over Alexa, Siri eavesdropping. Silicon Valley's latest unicorn is run by a 22-year-old. And finally, here's what Tracy's interested in this morning The big news to start the week is China's decision to allow the yuan to slip past the 7 per dollar mark, a proverbial "line in the sand." The move is widely seen as a response to Trump's latest round of tariffs, which I think is right. It's also being viewed as the start of a protracted devaluation of the Chinese currency, which I think is wrong. If you take a look at how the Chinese yuan trades against the basket of currencies authorities actually target—the China Foreign Exchange Trade System (CFETS) index—the recent move looks quite different. As Marc Ostwald at ADM puts it: "The current CNY move is about USD strength above all against EUR and many Asian currencies, for example KRW & AUD, and other EM FX." Again, the problem here is a strong dollar putting pressure on the rest of the world. Markets shouldn't worry because China's devaluing the yuan. They should worry that China seems to have taken a leaf out of Trump's "How to Play Trade Wars in a Completely Unpredictable Way" playbook and is using its currency to send signals about its intent. Having the world's two biggest economies play a game of 4D Trade War Chess against one another is not the kind of outcome most investors were hoping for. You can follow Bloomberg's Tracy Alloway at @tracyalloway.   The best in-depth reporting from Asia Pacific and beyond, delivered to your inbox every Friday. Sign up here for The Reading List, a new weekly email coming soon. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. FOLLOW US SEND TO A FRIEND You received this message because you are subscribed to Bloomberg's Five Things - Asia newsletter. Unsubscribe | Bloomberg.com | Contact Us Bloomberg L.P. 731 Lexington, New York, NY, 10022