Currency Divergence in Asia: How Sino-US Trade Tensions Create Opportunities in Won, Yuan, and Tech

The Sino-US trade war is no longer just about tariffs—it's a currency divergence game. Asian markets are split between currencies that could decouple from the dollar and sectors primed for tactical gains. Here's how to play it.

The Currency Split: Yuan and Won Face Opposing Winds

The yuan (CNY) and won (KRW) are at the center of Asia's currency divergence. While the yuan faces pressure from US tariff threats, the won has held firm—so far.

Yuan Under Pressure, But a Silver Lining

The USD/CNY rate has hovered near 7.20 this month, with forecasts suggesting it could hit 7.5 by September if trade tensions escalate. . The yuan's weakness stems from US tariff hikes on steel and aluminum, which Beijing has countered with threats of retaliation.

But here's the opportunity: China's central bank has tools to stabilize the currency. If US-China talks yield even a temporary truce—like extending solar tariff exemptions past August—the yuan could rebound. Analysts at J.P. Morgan see yuan appreciation to 6.74 by 2026 if tensions ease.

Won's Resilience, but Risks Loom

The won has strengthened nearly 7% year-to-date, outperforming most Asian currencies. This is despite South Korea's reliance on US-China trade. Why? The Bank of Korea's dovish stance contrasts with the Fed's uncertainty, and tech exports like semiconductors remain strong.

However, risks persist. If the US imposes broader tariffs on Chinese goods, South Korea's tech sector—critical for the won's strength—could suffer. Investors should watch for signs of a US-China trade thaw to confirm the won's gains.

Sector Plays: Tech and Commodities in the Crossfire

While currencies diverge, equities offer tactical entries in two key areas: tech and commodities.

Tech: Riding the AI Chip Boom Despite Tariffs

Taiwan's TSMC (TPE:2330) is a case in point. Despite US tariffs on Chinese AI chip imports, TSMC's stock rose 0.8% last week as demand for advanced semiconductors stays hot. .

The lesson? Tech stocks insulated by global demand—like those in Taiwan or South Korea—can thrive even amid trade volatility. Look for companies with exposure to AI, 5G, or EV batteries, which are less tied to Sino-US tariff disputes.

Commodities: Betting on a US-China Deal

Steel and aluminum stocks are ground zero for trade tensions. US tariffs on these metals have already hit 50%, but if a deal emerges—say, China agrees to roll back retaliatory measures—prices could rebound.

Investors should target commodity firms with hedged exposure. For example, Posco (KRX:005490) in South Korea benefits from diversified demand, while avoiding overexposure to US-China steel disputes.

The Trade Volatility Play: Time to Act

The key is to position for divergence—not uniform weakness. Here's how:

1. Short USD/CNY, Long KRW/USD: If you believe a US-China trade truce is coming, bet on yuan appreciation and won resilience.
2. Buy Tech with Global Demand: TSMC, Samsung Electronics (KRX:005930), and ASML (AS:ASML) are insulated from pure Sino-US tariff fights.
3. Commodity Stocks with Diversified Exposure: Posco, Nippon Steel (TSE:5401), and companies with hedged supply chains.

Risks to Avoid

• Overexposure to China's Export Sectors: Textiles, furniture, or raw materials hit by US tariffs.
• US-China Diplomatic Deadlock: If talks collapse, the yuan could plummet further, dragging down regional currencies.

Final Call: Act Before the Next Tariff Wave

The next 60 days will decide whether Sino-US tensions stabilize or escalate. The yuan and won are the canaries in the coal mine—watch their moves closely. For now, tech and commodity plays offer asymmetric upside.

The divergence is here. Capitalize on it—or be left behind.

This article is for informational purposes only. Always consult a financial advisor before making investment decisions.