U.S. Intervention, China Reassures on Yuan, Trump vs Xi: Eco Day

(Bloomberg) --

Welcome to Wednesday, Asia. Here's the latest news and analysis from Bloomberg Economics to help get your day started:

• The Trump administration's designation of China as a currency manipulator has raised the risk of U.S. FX intervention, analysts agree. What's less clear is how to drive up the yuan itself
• Meantime, St. Louis Fed chief James Bullard said direct economic consequences of the latest “tit for tat” moves could be small and he's sticking with his current forecast of one more rate cut
• Senior PBOC officials reassured foreign companies that the currency won't continue to weaken significantly, after the yuan fell below 7 per dollar for the first time since 2008. Liquidity conditions in China's banking sector tightened to “neutral” in July from “slightly loose” in June, writes David Qu
• When Xi Jinping first met Donald Trump back in 2017, the Chinese leader said they had “a thousand reasons to make the China-U.S. relationship a success.” Two years on, ties are at their lowest point in decades. Meanwhile, American consumers are bearing almost all of the cost of Trump's tariffs
• Central banks in emerging Asia are poised to cut rates as they bolster their economies against a wave of global threats
• It used to be that a buildup in foreign reserves was seen as a bulwark against currency shocks and swift turns in investor sentiment. Those days seem far away
• Global financial turmoil is raising the heat on the BOJ, raising the question how much pain it can take before it is forced to act
• Australian construction recorded its weakest activity in more than six years as a slowing economy and fallout from a prolonged housing slump drags on the industry
• Meantime, Australian Treasurer Josh Frydenberg urged the U.S. and China to negotiate a resolution to their dispute, describing the latest steps as an “unwanted escalation”
• Six weeks after U.S. President Donald Trump took his historic first steps into North Korea, talks with Kim Jong Un appear to be back on the verge of collapse
• A dream of building the world's biggest hydroelectric project in the heart of Africa may be inching closer to reality

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke

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