Exclusive: China central bank official says yuan at right level, disorderly capital flows unlikely

© Reuters. FILE PHOTO: Man sits in front of the headquarters of the People's Bank of China, the central bank, in Beijing © Reuters. FILE PHOTO: Man sits in front of the headquarters of the People’s Bank of China, the central bank, in Beijing

By Kevin Yao and Ryan Woo

BEIJING (Reuters) – China’s yuan is at an appropriate level currently and two-way fluctuations in the currency will not necessarily cause disorderly capital flows, a senior official at the People’s Bank of China told Reuters on Tuesday.

The yuan has weakened nearly 2.4% since U.S. President Donald Trump threatened early this month to impose more tariffs on Chinese goods from Sept. 1, though there are signs China is trying to stem the declines.

“The current level of exchange rate is appropriately aligned with fundamentals of China’s economy and market supply and demand,” Zhu Jun, head of the central bank’s international department, said in an interview with Reuters.

Zhu said China was “shocked” by the U.S. Treasury Department’s move last week to label China a currency manipulator, hours after Beijing let the yuan slide past the key 7-per dollar level to its lowest level since the global crisis.

But Zhu asserted that China will be able to “navigate all scenarios” arising from the Trump administration’s decision to label it a currency manipulator for the first time since 1994, which rattled global markets.

China is unlikely to face serious consequences from getting that label given the apparent lack of Group of Seven and International Monetary Fund support for Washington’s move, former and current U.S. and G7 officials said.

But some Chinese advisers and former officials have sounded alarm bells over a possible wider conflict between China and the United States. The year-long trade war between the world’s two largest economies has already spread beyond tit-for-tat tariffs on goods to other areas such as technology and currency.

UPGRADING THE TRADE WAR?

The real aim of the U.S. currency manipulator label is to disrupt China’s financial markets and its economy, said Chen , former chairman of the China Development Bank – the country’s biggest policy bank.

“The U.S. step to list China as a currency manipulating country is an important action to upgrade the trade war into a financial war,” Chen, who remains an influential figure on economic issues, told a forum over the weekend.

Zhu of the central bank told Reuters that in the short run, external shocks will play a role by influencing the yuan’s movements.

“That said, as long as RMB moves in an orderly manner based on market supply and demand, such movements in either direction do not necessarily mean disorderly movement of capital flow,” she said. The yuan is also known as renminbi, or RMB.

Zhu reiterated that recent yuan volatility was a normal market reaction to escalating trade tensions, adding “If it’s preventing such responses that would constitute real manipulation.”

Analysts say a weaker yuan could help China’s ailing exporters to cope with higher U.S. tariffs amid an escalating trade war, but any sharp yuan drops could fuel capital outflows as the world’s second-largest economy faces increased headwinds.

REPEATED PLEDGES

Chinese leaders have repeatedly pledged that they would not resort to competitive currency devaluation to support exports, or use the currency as a tool to cope with trade disputes.

Zhu said the yuan will be supported by China’s solid economic fundamentals, a stable debt ratio, contained financial risks, adequate foreign exchange reserves, and favorable interest rate spreads between China and major advanced economies.

“Over the medium and long term, we have full confidence in RMB as a strong currency,” she said.

In the second quarter, China’s annual economic growth pace slowed to a near 30-year low of 6.2%. Many analysts had expected a steadying in the second half as earlier stimulus measures started to kick in, but Trump’s latest tariff threat is likely to further pressure exporters and their domestic supply chains.

China’s foreign exchange reserves – the world’s largest – fall by $ 15.54 billion in July to $ 3.104 trillion, central bank data showed, amid rising trade tensions.

China burned through $ 1 trillion of reserves supporting the yuan in the last economic downturn in 2015, during which it devalued the currency in a surprise move. Since then, Beijing has shored up restrictions on capital outflows.

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Forex News

“We don’t doubt Draghi’s powers of persuasion” – Deutsche Bank

Deutsche Bank says that Draghi will get the job done for the ECB to pursue more easing monetary policy

Draghi ECB

The firm notes that the ECB meeting yesterday reaffirms the notion that we’re headed towards a policy easing package in September and believes that Draghi can persuade members of the governing council to deliver on that:

“The latest policy communications were a tale of two halves, however. In a departure from the norm, the Policy Decision statement was used to convey the primary policy message. There was an opportunity for Draghi to reinforce the dovish tone in the press conference, but the Q&A did not achieve this. If anything, the effect was the opposite. In that sense, Draghi has only half delivered on Sintra. He now has seven weeks to convince the Council to keep with him and deliver a strong enough easing package. Given his powers of persuasion, we don’t doubt him.”

ForexLive

As for the firm’s expectations, they have now changed their call of just a 10 bps deposit rate cut this year to a 10 bps rate cut in September (alongside rate tiering) followed by an additional 10 bps rate cut in December.

Meanwhile, they also changed their baseline scenario for September to include QE with the expectation of a €30 billion per month package for a minimum of 9-12 months split evenly between public and private assets.

However, the firm argues that the re-introduction of QE is still a close call and if data/events surprise to the upside in the mean time, the ECB could stall on that decision.

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Societe Generale sued for $792 million by heirs of Cuban bank seized by Castro

By Jonathan Stempel

(Reuters) – The family of the former owners of a Cuban bank seized by Fidel Castro’s government nearly six decades ago sued Societe Generale (PA:) for approximately $ 792 million, saying the French bank owes damages for circumventing U.S. sanctions against Cuba.

In a complaint filed on Wednesday with the U.S. District Court in Miami, 14 grandchildren of Carlos and Pura Nuñez, who once owned Banco Nuñez, want to hold Societe Generale liable under U.S. law for doing business with Cuba’s central bank, which nationalized Banco Nuñez and other lenders in 1960.

A lawyer for the plaintiffs said he believed the case was the first against a bank that allegedly “trafficked” in property expropriated by the Castro regime, since the Trump administration said in April it would begin letting U.S. nationals sue companies for such conduct.

“Victims of the Cuban regime who had their property confiscated now have a vehicle to get justice,” Javier Lopez, the lawyer, said in an interview. “We have multiple financial institutions that we’re looking to target.”

Societe Generale did not immediately respond to requests for comment after market hours.

The lawsuit was filed eight months after Societe Generale agreed to pay $ 1.34 billion and enter a deferred prosecution agreement to settle U.S. and New York regulatory charges that it handled billions of dollars of transactions related to Cuba and other countries under U.S. sanctions.

According to the plaintiffs, Societe Generale generated hundreds of millions of dollars of fees by lending money to and processing transactions for Banco Nacional de Cuba from 2000 to 2010.

The plaintiffs said they own a claim to 10.5% of the equity in Banco Nacional de Cuba, roughly the percentage that Banco Nuñez represented when it was seized.

Lawyers for the plaintiffs at Kozyak Tropin & Throckmorton based the $ 792 million damages estimate on Banco Nuñez’s $ 7.8 million worth at the time, plus 6% annual interest and triple damages under the Helms-Burton Act, a 1996 federal law.

The right to sue under that law had been suspended for 23 years because of opposition from the international community and concern that U.S. courts could be overrun by lawsuits.

Secretary of State Mike Pompeo announced the lifting of that suspension in April, to boost pressure on Havana to end Cuban support for Venezuela’s socialist president, Nicolas Maduro.

The case is Sucesors de Don Carlos Nuñez y Doña Pura Galvez Inc v Societe Generale SA, U.S. District Court, Southern (NYSE:) District of Florida, No. 19-22842.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Deutsche Bank U.S. Cuts May Go Deeper Than Equities, Rates

© Bloomberg. People enter Deutsche Bank AG headquarters on Wall Street in New York, U.S., on Thursday, April, 26, 2018. Deutsche Bank AG is planning to cut more than 10 percent of U.S. jobs as it withdraws from businesses where it can't compete, a person briefed on the matter said. © Bloomberg. People enter Deutsche Bank AG headquarters on Wall Street in New York, U.S., on Thursday, April, 26, 2018. Deutsche Bank AG is planning to cut more than 10 percent of U.S. jobs as it withdraws from businesses where it can’t compete, a person briefed on the matter said.

(Bloomberg) — Deutsche Bank (DE:) AG’s job cuts across the U.S. will probably go far beyond equities and interest-rate derivatives trading, which have been marked as major targets, according to people with knowledge of the matter.

The German lender plans to start informing U.S. workers of the reductions beginning Monday provided its restructuring plan is adopted over the weekend, the people said, asking not to be identified because the matter is private. They didn’t give further details on which businesses may be affected.

Chief Executive Officer Christian Sewing is poised to adopt a sweeping restructuring plan focused on as many as 20,000 job cuts worldwide and a pullback from large areas of investment banking, the people have said. The bank may shutter U.S. equities trading entirely and a number of senior executives including U.S. chief Tom Patrick are leaving the bank, they said. The bank hasn’t yet detailed the cuts or how they’ll be distributed.

A Deutsche Bank spokesman declined to comment.

Germany’s largest lender employed 9,253 people in the U.S. at the end of 2018, down more than 10% on the previous year on the back of a restructuring Sewing introduced a little more than a year ago. Though the regional unit made a small profit last year, it racked up billions of dollars in losses in the preceding years. It has also been repeatedly under fire from U.S. regulators even though it recently passed the Fed’s stress test.

European operations are expected to fare much better. Deutsche Bank’s Nordic region chief Jan Olsson predicted that the overhaul will have little impact on the businesses he oversees. The area is “an integral part of the strategy at Deutsche Bank,” he said in an interview on Thursday.

Sewing has repeatedly said that Deutsche Bank remains committed to its U.S. presence, as the company wants to ensure it can continue to cater to the capital markets needs of large European companies. The lender may finalize the restructuring when the board meets this weekend.

(Updates with Nordic region CEO in sixth paragraph.)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback

© Reuters.  Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback © Reuters. Australia’s Central Bank Looks Likely to Cut Rates ⁠— From the Outback

(Bloomberg) — The Reserve Bank of Australia’s policy decision on Tuesday is more unusual than most.

Not only could Governor Philip Lowe and his board deliver a second consecutive interest-rate cut –- the last time the RBA did that was in 2012 — it’s also the first time they will meet in Darwin in more than 50 years.

A city closer to Jakarta than Sydney, Darwin is a symbolic trip for the policy makers. Lowe will deliver a speech on his rates policy to community leaders and then plans to travel to East Arnhem Land to meet with indigenous groups and pay respects to the RBA’s first governor, the legendary H.C. ‘Nugget’ Coombs, half of whose ashes lie in the area.

The last time the RBA’s board met in Darwin it adjusted policy to encourage saving. Fifty-one years later, Lowe and his colleagues return with the aim of spurring Australians to spend.

The central bank is striving to revive an economy that’s just clocked 28 years without recession, yet is on track for its weakest fiscal year since 1991. Markets are pricing in a 70% chance that the RBA will take rates to a record 1% on Tuesday, while 21 of 32 economists in a Bloomberg survey expect them to move.

Lowe and his board have a number of risks to balance: domestically there’s a sagging property market making consumers hesitant, and a government infrastructure boost coming; globally, a U.S.-China trade truce for now won’t do much to halt a slowdown in China and the world economy.

The RBA chief must sometimes wish he had the levers available to Coombs. At the June 1968 board meeting a shortage of liquidity led the RBA to lift the bank deposit rate in order to spur saving. Lowe, in contrast, is regularly inundated with letters from savers — often older Australians — complaining his rate cuts are eroding their income.

The RBA’s 1968 Darwin meeting was actually the mid-point in an Outback odyssey that saw the board fly through Queensland, the Northern Territory and Western Australia to look at new mines that were springing up. It was a different era: these days Lowe and his deputy, Guy Debelle, aren’t supposed to be in a plane together, let alone the whole board.

Community Engagement

The RBA’s return to Darwin five decades on is more coincidence than design. Officials say board members find the community engagement aspect of trips outside Sydney useful to help understand sentiment. Having recently journeyed to Hobart, Darwin was the obvious next choice. Once that visit was decided, it was suggested the RBA try to rekindle the relationship with the people of East Arnhem Land.

Coombs’s ties with the region dated back to a dispute over copyright on the artwork on the A$ 1 bill by artist David Malangi. In 1967, Coombs met Malangi and resolved the issue, and also began an association that would stretch through until Coombs’s death in 1997 at age 91. (Half of his ashes were scattered at the Australian National University and the other half in East Arnhem Land).

In his final nine months as governor through 1968, Coombs was also chairman of the Council of Aboriginal Affairs and an early proponent of reconciliation. He would take up the cause of Arnhem Land’s people in their fight against a bauxite mine constructed in the area; this involved the famous bark petition protest that is now on display in parliament house.

Despite his extensive contacts in government, Coombs was unable to halt the mine. But he would make contact with a young Galarrwuy Yunupingu, who would go on to be a leader of the Australian indigenous community and older brother to Mandawuy, late front man of rock group Yothu Yindi.

It is this history Lowe is seeking to reconnect the RBA with. Together with Catherine Tanna, a board member and managing director of EnergyAustralia; Susan Moylan-Coombs, a broadcaster and granddaughter to Nugget who was also a member of the Stolen Generation; Philip Gaetjens, Secretary to the Treasury who sits on the central bank board; and Anthony Dickman, secretary at the RBA.

If rates are cut and all goes well, it will at the very least give the governor a day free of letters from angry pensioners.

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Euro zone bank profitability may weaken on slowdown: ECB

© Reuters. FILE PHOTO: Governing Council of the ECB monetary policy meeting in Vilnius © Reuters. FILE PHOTO: Governing Council of the ECB monetary policy meeting in Vilnius

FRANKFURT (Reuters) – Profitability across the euro zone bank sector is low and weakening growth could further dampen the sector’s prospects, European Central Bank Vice President Luis de Guindos said on Tuesday.

Negative ECB rates are not the cause of the weakness as super easy monetary policy has so far had a neutral effect on bank profits, de Guindos told a conference in Rome.

“Nevertheless, the overall effects of negative rates on the banking sector need to be carefully monitored, particularly because the balance of their effects will depend on how long rates remain in negative territory,” he added.

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U.S. regional bank Prosperity to buy peer LegacyTexas for $2.1 billion

© Reuters.  U.S. regional bank Prosperity to buy peer LegacyTexas for $  2.1 billion © Reuters. U.S. regional bank Prosperity to buy peer LegacyTexas for $ 2.1 billion

(Reuters) – U.S. regional bank Prosperity Bancshares Inc said on Monday it would buy Plano, Texas-based peer LegacyTexas Financial Group Inc for $ 2.1 billion, creating the second-biggest bank by deposits in the state.

LegacyTexas shareholders will receive 0.528 Prosperity shares, and $ 6.28 in cash for each share held, representing a deal value of $ 41.78 per share, a premium of 9.3% based on the closing price of LegacyTexas on Friday.

The deal is also expected to strengthen Houston, Texas-based Prosperity’s foothold in North Texas cities as well as in and around the Dallas-Fort Worth area.

As of March 31, 2019, LegacyTexas held assets worth more than $ 9 billion, total loans of $ 8.1 billion and total deposits of $ 7.1 billion, while Prosperity held $ 22.35 billion in assets and $ 17.2 billion in deposits.

Dealmaking in the banking sector has been rising ever since U.S. President Donald Trump lowered corporate taxes and eased financial regulations on regional banks.

M&A activity in the sector had languished after the 2007-2009 financial crisis, as stricter rules were imposed on lenders with more than $ 50 billion in assets and regulators barred banks with compliance issues from expanding.

But a cut in corporate taxes in December 2017 and easing of stringent capital requirements in the following year have freed up capital, reviving dealmaking in the banking sector.

Earlier this year, U.S. regional lender BB&T Corp (NYSE:) bought rival SunTrust Banks (NYSE:) for about $ 28 billion in stock, marking the first big bank merger since the 2007-2009 crisis.

With more financial easing on the horizon, Wall Street analysts have said they remain optimistic about more consolidation in the banking sector, especially between super-regional banks.

The deal between Prosperity and LegacyTexas is expected to close in the fourth quarter.

Kevin Hanigan, chief executive of LegacyTexas, will join Prosperity as its chief operating officer, the companies said.

Prosperity’s financial adviser in the deal was Keefe, Bruyette & Woods, while J.P. Morgan Securities LLC acted as financial adviser for LegacyTexas.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Bank of Russia Resumes Easing Cycle With First Cut in a Year

&copy Bloomberg. The obverse, right, and reverse sides of 2014 issue Russian one ruble coins sit in this arranged photograph in Moscow, Russia, on Tuesday, Aug. 5, 2014. Russian government bonds slid, taking yields to a five-year high, and the ruble fell on concern the conflict in Ukraine will escalate after Poland warned President Vladimir Putin may be preparing to invade. &© Bloomberg. The obverse, right, and reverse sides of 2014 issue Russian one ruble coins sit in this arranged photograph in Moscow, Russia, on Tuesday, Aug. 5, 2014. Russian government bonds slid, taking yields to a five-year high, and the ruble fell on concern the conflict in Ukraine will escalate after Poland warned President Vladimir Putin may be preparing to invade.

(Bloomberg) — Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.

Russia cut interest rates for the first time since March 2018 and signaled more monetary easing at one of its upcoming meetings as growth slowed and inflation retreated closer to the central bank’s target.

The key rate was cut to 7.50% from 7.75%, according to a statement on Friday. That matched 33 forecasts in a Bloomberg survey, while two economists expected no change. Bank of Russia Governor Elvira Nabiullina will hold a news conference at 3pm in Moscow.

“If the situation develops in line with the baseline forecast, the Bank of Russia sees the possibility of a further key rate reduction at one of the upcoming Board of Directors’ meetings and a transition to neutral monetary policy by mid-2020,” the central bank said in its statement.

Read our live blog for more on the Russian rate decision

The move makes Russia the latest emerging market to tilt toward more dovish policy as escalating trade woes weigh on growth. Chile and India also lowered their benchmark rates recently and other central banks will likely follow if the Federal Reserve signals a shift to easing.

The change in trajectory of interest rates in developed economies reduces the risk of persistent outflows from emerging markets, the statement said.

The ruble extended gains and 10-year government bond yields retreated 4 basis points to 7.66% as investors cheered the prospect of more rate cuts and slower inflation. bonds, known as OFZs, have already handed carry traders some of the best returns in emerging markets this year.

“The central bank definitely wanted to signal that it is joining the global monetary easing trend,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki. “We see more flows into OFZs given the current rate and inflation outlook.”

Annual inflation decelerated for a third month in June, reaching 5% as of June 10, the central bank said. Price growth will slow to 4.2%-4.7% by the end of the year, the statement said, citing weak consumer demand and ruble strength.

Inflation could rise if the Finance Ministry goes ahead with an idea to invest money accumulated in Russia’s wealth fund, the statement warned.

‘Dovish Undertones’

The central bank also cut its growth forecast for 2019 to 1.0%-1.5% from 1.2%-1.7%. A worsening of international trade tensions may lead to a slowdown in global growth, the statement warned.

Most economists are forecasting a second rate cut from Russia in September, and some see another one by the end of the year. Nabiullina warned last week that there’s no rush to undo two surprise rate hikes imposed last year as inflation jumped.

“The overall dovish undertones of the statement strongly suggest that the central bank will make another 25 basis points cut in 2019,” said Ivan Tchakarov, a Moscow-based economist at Citigroup Inc (NYSE:). “Given that the neutral policy rate is seen by the central bank in the range of 6-7%, there will be scope for further cuts next year.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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ECB Pushes Back Bank Rate Hike Again as Trade War Hits Euro Zone

© Reuters.  © Reuters.

Investing.com — The European Central Bank again pushed back the date when it will start to consider raising interest rates, effectively acknowledging that the global slowdown largely started by the U.S.-China trade dispute is undermining the Eurozone economy too.

However, the bank chose not to reintroduce the possibility of another interest rate cut into its forward guidance. That raises the likelihood that the euro’s interest rate differential with the dollar will narrow in the future, given that the Federal Reserve appears to be pivoting to a looser policy stance.

In a statement, the ECB said that “the Governing Council expects the key ECB interest rates to remain at their present levels at least through the first half of 2020.”

It’s the second straight meeting that the ECB has extended the timeframe for its first hike since 2011. At its last meeting, it had pushed out the timing from September to the end of 2019. The new stance means that whoever replaces Mario Draghi as president of the ECB in November will find it near impossible to move the bank’s interest rates for at least eight months.

“The biggest news for markets is not that the ECB won’t hike, but that the ECB won’t *cut* rates over the next 12 months,” said Pictet Asset Management economic Frederik Ducrozet via Twitter.

In addition, the bank said it would price its new round of “Targeted Long-Term Refinancing Operations”, or TLTROs, which begins in September, at as little as 10 basis points over its deposit rate, which is currently at -0.40%. The precise rate will vary, depending on how much banks lend on to companies and households.

The reacted by rising around one-third of a cent against the dollar, hitting an intra-day high of $ 1.1271, while the yield on the benchmark rose by 2 basis points to -0.21%, having been close to a new all-time low immediately before the decision.

“ECB forward guidance change was the big underpriced risk today and it has now materialized,” said Lena Komileva, chief executive of G+ economics. “Once again, Draghi’s ECB has moved ahead of the markets’ expected timeline.”

As expected, the ECB left its official interest rates all unchanged. The deposit rate has been at -0.4% and the key refinancing rate has been at 0% since March 2016.

President Mario Draghi will expand on the decision at his press conference, which begins at 8.30 AM ET (1230 GMT).

Draghi is also due to unveil the ECB’s updated forecasts for growth and inflation for the next two years.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Vietnam central bank says not pursuing ‘unhealthy competitive advantage’ in trade

© Reuters. A Vietnamese flag flies atop the State Bank building in central Hanoi © Reuters. A Vietnamese flag flies atop the State Bank building in central Hanoi

By Khanh Vu

HANOI (Reuters) – The State Bank of Vietnam, the central bank, said on Thursday it is not pursuing an “unhealthy competitive advantage” in international trade after the Trump administration raised concern over currency practices this week.

The U.S. Treasury Department, in a semi-annual report to Congress, said it reviewed the policies of an expanded set of 21 major U.S. trading partners and found that nine required close attention due to currency practices, including Vietnam.

“The State Bank of Vietnam will coordinate with relevant agencies to discuss and address the issue raised by the U.S. Treasury in a cooperative manner,” the central bank said.

The central bank said it would pursue a flexible foreign exchange rate “in accordance with domestic and international market conditions”.

The United States is Vietnam’s largest export market and the Southeast Asian country is seeing an ever-widening trade surplus, which rose to $ 13.47 billion in the first four months of this year from $ 10.19 billion a year earlier.

Last week, the central bank said it was ready to pump U.S. dollars into the market to stabilize the dong currency’s exchange rate, as it had come under pressure due to fallout from the U.S.-China trade war.

Vietnam’s dong has weakened 0.97 percent this year and has fallen 2.7 percent from a year earlier, according to Refinitiv Eikon data. The dong was quoted at 23,416/23,418 to the dollar on Thursday.

ING Bank said in a note on Wednesday that Vietnam was at risk of being labeled a currency manipulator because of its trade surplus with the United States, a highly positive current account balance (+5.4% of GDP) and the fact that its central bank had been quite active in terms of net foreign exchange purchases.

“If this happens, the impact on the dong isn’t very easy to prefigure. But in the long term, it’s fair to believe the currency may face upside pressure against the USD, in particular, if the negotiations that follow prompt a change in currency intervention practices,” ING said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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