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Trump Trade War May Actually End Up Supporting China's Currency

  • South Korea, Taiwan forward curves turn flatter since March
  • Trade spat has sparked bets of more gains in the coming months

Don’t be fooled by the Chinese yuan’s drop on Trump’s trade-war bluster. Forward markets show investors are actually betting on it to stabilize, boosting the outlook for South Korea’s won and the Taiwan dollar along the way. 

USD/CNH forward points, particularly the 6- and 12-month tenors, show the yuan depreciating far less in the past month than earlier this year, even as threatened U.S. tariffs provoked a tit-for-tat response from China. The moves represent wagers that China will keep the yuan stable or even allow more gains, aiming to allay U.S. suspicions it’s using a cheap currency to win a trade war.