LONDON (Reuters) - The Chinese yuan skidded toward an 11-month low and the Australian dollar fell on Wednesday after the Trump administration threatened 10 percent tariffs on $200 billion worth of Chinese imports in an escalating trade conflict.
The most traded currencies, the U.S. dollar and euro, were largely unmoved though the single currency was the weaker while the safe-haven Japanese yen remained flat, reflecting limited reaction in broader currency markets.
Traders instead focused their attention on where a ratcheting of Sino-U.S. trade tensions will likely hit fastest - in China and in Asia where countries like Australia depend on Chinese demand for their exports.
Asian equities also sold off, bringing a recent rally in markets as investors focused on the relative strength of the global economy to a halt.
The news of more possible tariffs comes days after Washington imposed 25 percent tariffs on $34 billion of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of U.S. exports to China.
“The recent recovery on the markets came to an abrupt end this morning. Investors are going to be waiting for a reaction from Beijing once again,” said Commerzbank analysts.
They said it remained a matter of debate whether the biggest impact of more tariffs would be felt in China or the United States, describing the implications for the dollar “difficult to gauge” as weaker growth may coincide with higher inflation.
The offshore Chinese yuan fell as low as 6.6918 per dollar CNH=D3, down more than half a percent from late U.S. levels and edging near its
