A glitch showed a shocking drop in the value of China’s currency, raising concerns that China is retaliating against President-elect Donald Trump.
Xe.com, Google, and several financial institutions reported Monday afternoon that the value of the Chinese Yuan had dropped 10 percent and was trading 7.48 CNY per USD, according to the Global Times.
Some observers commented that the slide may have been in response to Trump’s weekend tweets, as well as his historic phone conversation with Taiwanese leadership.
Trump accepted a call from Taiwanese President Tsai Ing-wen Friday, an unprecedented move that broke protocol and decades of diplomatic practice.
The president-elect doubled down Sunday, tweeting, “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!”
“Could Beijing have have just answered President-elect Donald Trump’s weekend provocations?” Foreign Policy asked Monday night.
“The question is whether Beijing, by allowing its currency to suddenly slide, thus giving its export-based economy an immediate boost, gave Trump an immediate and provocative answer to his tweets — or whether global currency traders, seeing signs of increased tension between China and the United States simply got bearish on Chinese money,” the article speculated.
Foreign Policy also acknowledged the possibility that the sudden devaluation of China’s currency may have also been a “trading-platform glitch.”
The last theory turned out to be the case.
The Chinese Yuan was actually trading at 6.87 CNY per USD. More importantly, the Chinese yuan does not trade overnight, which is when the drop supposedly occurred, the New York Times revealed.
The source of the error was London-based foreign exchange brokerage and data provider ICAP.
“Today in the early Asian hours there was an inaccuracy in spot USD/CNY quotes published to the market via a number of data sources, including vendor screens that ICAP publishes to,” ICAP revealed in a statement Tuesday, according to the South China Morning Post.
The error has since been corrected.
China’s currency has been depreciating steadily throughout the year. China is suspected of playing a balancing game, wherein it manipulates its currency to protect its exports but props it up to keep it from falling too fast, causing capital flight and draining foreign exchange reserves.
Trump threatens consistently to label China a currency manipulator when his administration assumes office.
Having followed an uptick in tensions with China, the glitch came at a unfortunate time.
“What is interesting is how plausible the world found this scenario, like just waiting for the other shoe to drop,” Christopher Balding, an associate professor of finance at the Peking University HSBC School of Business in Shenzhen, China, told the NYT.
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