The US House of Representatives passed the senate's Hong Kong Human Rights and Democracy Act with only a single dissenter and now President Donald Trump has 10 days to decide to sign or veto it. The latter appears futile as it seems congress has the votes to override a veto.
China's government has already slammed US senators for passing the act, saying it "blatantly interferes in Hong Kong affairs and China's other internal affairs."
China's Ministry of Foreign Affairs has said that "China will have to take strong countermeasures to defend our national sovereignty, security and development interests."
"There's been some disquiet due to the swift and near-unanimous passing" of the US legislation, says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.
The US-China deal had appeared to be all but inked but then both sides started to walk back their position with China arguing that US tariffs should be wound back as part of the deal.
Overnight, New Zealand time, Trump was quoted as saying that "I don't think China is stepping up to the level that I want."
Nevertheless, financial markets are clinging to reports that neither country wants US tariffs set to take effect from December 15 to go ahead because they would hit popular products such as smartphones, hurting US customers and China's manufacturing base alike.
Asia market strategist at AxiTrader, Stephen Innes, says the market is "firmly on China watch, waiting to measure Beijing's response to the Hong Kong bill and to determine if it becomes another roadblock to a trade deal."
The market is spooked "as the fear of the unknown is a trader's worst enemy," he says.
The New Zealand dollar was trading at 94.31 Australian cents from 94.33, at 49.87 British pence from 49.64, at 57.86 euro cents from 57.89, at 69.54 Japanese yen from 69.53, and at 4.5016 Chinese yuan from 4.4996.
The two-year swap rate edged up to a bid price of 1.1261 per cent from 1.1200 per cent yesterday while 10-year swaps rose to 1.5000 per cent from 1.4625 per cent.
