US President Donald Trump on Friday accused China and the European Union of “manipulating their currencies and interest rates lower”.
The comments came after the yuan plunged to its lowest level in a year, with little sign of China’s central bank intervening to stem the slide. They also follow a decline in the euro this year and add to the calculus that European Central Bank policy makers might need to consider when they meet next week.
As the world’s largest economies open up a new front in their increasingly acrimonious game of brinkmanship, the consequences could be dire – and ripple far beyond the US and Chinese currencies. Everything from equities to oil to emerging-market assets are in danger of becoming collateral damage as the current global financial order is assailed from Beijing to Washington.
Risk assets and oil prices would likely tumble as worries about growth arise, hitting currencies of commodity-exporting countries particularly hard – namely, the Russian ruble, Colombian peso and Malaysian ringgit – before taking down the rest of Asia.