China currency: yuan traders grow anxious at prospect of Donald Trump return to White House

“Jitters about the renminbi in the coming months are partly related to the possibility of another Trump presidency, which would mean more political and trade tension with China,” said Chi Lo, senior investment strategist for Asia-Pacific at BNP Paribas Asset Management. “Trump’s recent talk about levying 60 per cent tariffs on Chinese imports underscores such worries.”

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US election concerns are compounded by those about China’s domestic problems and measures to address them, which are also adding to the premium to hedge the yuan, according to Lo. Barring any assertive policy moves, “as long as such scepticism exists, the yuan exchange rate will be volatile,” he said.

Wall Street is already starting to game out the impact of Trump’s possible return to the White House, with many strategists suggesting it would bolster the dollar and push bond yields higher. Euro traders are also pushing up the price of hedging the common currency.

Still, it seems to be more of a trickle than a flood of option wagers with some fast money investors reluctant to put on trades until they have further conviction about the dollar’s direction and when the Federal Reserve may start its interest-rate cutting cycle.

“The nine-month window, as we move closer increasingly we’ll see a lot more bets on what the election outcome might look like,” Jun Bei Liu a portfolio manager at Tribeca Investment Partners said on Bloomberg Television. “It certainly seems the currency itself will be a big target.”