BRICS member China’s local currency, the Chinese yuan, has fallen into unchartered waters after Trump’s election victory early this month. The Chinese yuan has fallen to its 14-month low after Trump reclaimed the White House by defeating his Democratic rival Kamala Harris. Local currencies are now under pressure as the DXY index, which tracks the performance of the US dollar soared to 107 on Thursday.
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The US dollar spiked 0.51 points on Thursday surging by 0.48% in the day’s trade. The strengthening of the US dollar is making local currencies dip to new yearly lows. A resurgence from here could be tough as the broader US market remains in the bullish phase filled with optimism. Therefore, the local currencies of BRICS nations like the Chinese yuan are under pressure after Trump’s victory.
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BRICS: Trump Looks to Trounce the Chinese Yuan
Trump recently said in an interview that if BRICS tries to settle trade in the Chinese yuan and not the US dollar, he will levy a 100% tariff on all goods entering the US. China’s economy is built on exports and paying additional taxes for goods entering the US will only harm its economy. The inflationary impact of tariffs would complicate the financial situation in the Communist nation.
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“Trump’s return to power will certainly bring greater opportunities and greater risks for (BRICS member) China,” said Shen Dingli, a foreign policy analyst in Shanghai. “Whether it eventually leads to more risks or more opportunities depends on how the two sides interact with each other.”
BRICS will no longer aggressively pursue the de-dollarization agenda as it now comes with consequences from the Trump presidency. A trade impact while the economies are just out from the COVID-19 losses could prove fatal for developing countries. After Trump’s victory, not just the Chinese yuan, but even the Indian rupee has fallen to an all-time low of 84.47.