Washington: The growing war of words between the US and China, the world's two largest economies, put tremendous pressure on the Chinese currency yuan, as investors were more cautious at this time than the volatility in equity markets. The biggest reason for this is Hong Kong. S Secretary of State Mike Pompeo said on Wednesday that China's plan to enforce Hong Kong law was "only the latest in a series of actions that fundamentally undermined the city's autonomy and independence".

One yuan of US-China relations touched a low of 7.1966 per dollar in offshore trade on Wednesday and remained at 7.1852 on Thursday. At the same time, the Australian and Kiwi bounced back to a two-month high during the London session and both fell during the Asian trade. Australian AUD = D3 was down 0.5% at $ 0.6592 and Kiwi NZD = D3 was at $ 0.6174.

On this turmoil, Jason Wong, senior market strategist at BNZ in Wellington, said, "Overall, the macro story is hard to ignore, as things are changing rapidly. He said "but somewhere, it's clear that China Markets are an important part. Markets are waiting for China's response (on Hong Kong) and we are a bit stuck in the middle."

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