11:18 AM EDT, 04/18/2024 (MT Newswires) -- Selling the Chinese renminbi (USD/CNH) and buying the US dollar is the clearest and most compelling US election trade in the foreign exchange market, according to a trader at CitiFX.

China remains a major campaign issue ahead of the November election and tensions over trade between it and the US are why Sandeep Paul, a currency trader at CitiFX, continues to like buying USD/CNH and says a rally above 7.30 is just a matter of time.

"Trade tensions is one of the reasons our trader Sandeep Paul continues to like long USD/CNH," said Rui Ding, a director of market commentary at CitiFX, in a Thursday note to clients.

"This, along with the recent PBoC CNY fixing signal and CFETS [China Foreign Exchange Trade System] basket strength, suggests USD/CNH through 7.30 is a matter of time," she added.

Citi's Paul reportedly expects that calls for new tariffs and more protectionism will continue to grow as the current President Joe Biden seeks to close the polling gap between himself and former president Donald Trump.

"Trump has already threatened a 60% tariff on all Chinese imports. China Citi Economics warned "in theory it could squeeze all Chinese exports out of US markets," CitiFX's Rui Ding wrote on Thursday.

The managed-floating USD/CNY pair is permitted to trade no more than 2% above or below the established central parity fixing at any given time.

However, Reuters' calculations based on the PBoC's methodology for establishing the fix have consistently suggested in recent weeks that the central parity rate should be closer to 7.24, which would allow USD/CNY to trade as high as 7.38.