Donald Trump's Tweets, Political Value Judgment, And the Renminbi Exchange Rate

Abstract

This study examines the influence of former U.S. President Donald Trump’s China-related tweets on the daily return and conditional volatility of onshore(CNY) and offshore (CNH) Renminbi exchange rates. Using sentiment analysis techniques to extract political value judgments, we find that his sentiment towardsChina significantly impacted the CNH market, leading to a 0.043% depreciation and no discernible effect on the CNY market. During the trade tension period,both markets’ conditional volatility responded to the tweets, with the CNH market displaying a reaction to aggregate sentiment. Our results demonstrate theimportance of considering market conditions when analysing the effects of political rhetoric on different segments of the Renminbi exchange rate market.

Keywords: Donald Trump, Twitter, Chinese Yuan, CNH, CNY