The US House of Representatives overwhelmingly approved a currency legislation overnight.

The bill enables US industries to seek relief through tariffs on imports from “economies with fundamentally undervalued currencies” (such as China).

Although we believe this particular bill is unlikely to be enacted due to foreseeable difficulties in legislation and implementation, elevated trade disputes activity against China is unlikely to subside given high unemployment rates in the G-3 in the near term.

On the other hand, the Chinese government will probably adjust the pace of the CNY’s appreciation to pacify protectionists while increasing imports to reduce external imbalances.

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