• Largest single-day drop in yuan since Feb. 2018: Report
  • Yuan also suffering due to delay in Ant Group IPO
  • Emerging markets rallied when Joe Biden started leading in battleground states

The Chinese markets spiraled overnight Wednesday on the early possibility of President Donald Trump getting another term in the White House.

The Chinese yuan plunged as much as 1.4% for a brief period against the U.S. dollar when polls were too close to call between former Vice President Joe Biden and Trump. The drop coincided with periods when Trump was leading in major states.

It was the largest single-day drop in yuan since February 2018, Stephen Innes, strategist at Axi, told CNN. The currency recovered from its losses later when more ballots were counted.

Barclays noted that currency markets are voting “with their feet.” “When it seemed like the president was winning easily, currencies like the yuan and the Mexican peso sold off overnight,” said analysts with the bank quoted by CNN. “But both are now rallying early morning and the yuan has taken back most of its overnight losses.”

The Trump administration has pushed for policies that have targeted China and its businesses, to crack down on their alleged abuses like currency manipulation and unfair trade practices.

The Chinese markets will continue to be impacted by the U.S. elections. Reports suggest that no matter who comes to power, China has reason to worry as Trump and Biden both acknowledged the risk China poses to the U.S. from a security and economic point of view. JPMorgan said in a note last month that the relationship between U.S. and China will continue to be strained even if Biden is elected.

But it is not clear yet what Biden will do with Trump’s nearly $400 billion tariffs on Chinese goods. “Biden has tried to talk tough on China the last year, but it is just talk and his long record tells a different story,” Rebeccah Heinrichs at the Hudson Institute told Newsweek, adding that his approach will be much less intense than Trump’s approach.

Another factor creating havoc on the Chinese markets is the halt of Ant Group’s blockbuster IPO, which was scheduled for November 5. The yuan had been rising in recent months as China’s economy recovered from COVID-19.

Currencies in emerging markets such as Brazil, Mexico and Russia also rallied on Wednesday against a weaker dollar as trends suggested a Joe Biden lead in battleground states.

Democrat Joe Biden is hoping to unseat President Donald Trump in the most polarized US election for decades
Democrat Joe Biden is hoping to unseat President Donald Trump in the most polarized US election for decades AFP / Olivier DOULIERY