China’s exports probably fell for a second successive month, while imports likely contracted more sharply in July, escalating a trade war between the world’s two biggest economies that is the US and China.
The incidents precipitated bursts of capital flight that distorted the Chinese economy and forced the authorities to prop up the currency by using capital controls and purchases by state-run banks. On the other hand, Chinese seed and food company shares and rare-earth firms were boosted on hopes that Beijing will not buy more from the US.
The reality is that the US has a far greater ability to control its own currency than Europe, which is beset with problems including Italian instability, an unbalanced economy across the bloc and fiscal tightness. Meanwhile, the Trump administration may realise that the most effective and beneficial route to weakening the US dollar will be correcting the underlying fundamentals, not intervention.
Read EquityPandit’s Nifty Outlook for the Week