Yuan Crashes After Trump Weighs Blocking Retirement Fund Access To Chinese Stocks As War Of Words Escalates | WHAT REALLY HAPPENED

Yuan Crashes After Trump Weighs Blocking Retirement Fund Access To Chinese Stocks As War Of Words Escalates

Having tumbled yesterday on the first set of headlines reporting on the Trump administration's plans to seek 'COVID reparations' amid accusations of Chinese 'meddling' in the US election (obviously not in favor of Trump), the Chinese yuan legged dramatically lower in this evening's illiquid session which sees most of Asia closed for May Day, after Bloomberg reports that Trump is exploring blocking a government retirement fund from investing in Chinese equities considered a national security risk.

And tonight, Bloomberg reports that, after months of pressure from concerned lawmakers, according to a person familiar with the internal deliberations, the Trump admin is planning an executive order to block a 2017 decision that The Thrift Savings Plan, the federal government’s retirement savings fund, would transfer a massive $50 billion to an international fund which would mirror the MSCI All-Country World Index.

The issue being China's addition to the index, and thus the fund being forced to allocate significant capital to the Chinese stock markets, at a time when the gloves between the two nations are clearly off.

Needless to say, the optics of the US halting capital from entering China would be staggering and could result in a reversion of China-bound capital flows across all Western countries until the current war of words between Trump and Xi rages. The only problem is that, as we noted yesterday, this particular war of words could last a long time, since there is no longer any impetus to kiss and make up, and if anything, Trump will only escalate the anti-China sentiment into the election (and after), to keep pounding that the collapse resulting from the coronavirus pandemic is not his fault, but rather's Beijing, even as China pursues a mirror image approach, blaming the US for launching the pandemic.

The most obvious market reaction for now is in Offshore Yuan which has collapsed in the last two days, extending losses tonigh

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