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

Capital One: hacker gained access to personal information of over 100 million Americans

© Reuters. The logo and ticker for Capital One are displayed on a screen on the floor of the NYSE in New York © Reuters. The logo and ticker for Capital One are displayed on a screen on the floor of the NYSE in New York

(Reuters) – Capital One Financial Corp (N:) said on Monday the personal information including names, addresses, phone numbers and dates of birth of about 100 million individuals in the United States were obtained by a hacker who has now been arrested.

The incident also affected about 6 million people in Canada.

Capital said it identified the hack on July 19 and the individual responsible has been arrested by the Federal Bureau of Investigation.

The hacker did not gain access to any credit card account numbers and over 99% of social security numbers were not compromised, Capital One 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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Hedge fund Vor Capital secures investment from Borealis Strategic: sources

Hedge fund Vor Capital secures investment from Borealis Strategic: sources Hedge fund Vor Capital secures investment from Borealis Strategic: sources

By Svea Herbst-Bayliss

BOSTON (Reuters) – Borealis Strategic Capital Partners, which invests in new hedge funds, has written its first check to commit capital to Europe-oriented stock fund Vor Capital, two people familiar with the matter said on Friday.

Vor Capital launched a year ago with a plan to invest in mid-sized European internet companies. It is run by Brant Rubin, who previously worked for hedge fund Luxor Capital.

Borealis did not answer a call for comment. Vor did not return an email seeking comment.

The sources did not say how much Borealis was committing but one said it would bring Vor Capital’s total assets under management to roughly $ 100 million.

Many institutional investors are giving hedge funds the cold shoulder, criticizing their high fees and generally lackluster returns. But investors are still eager to find promising newcomers who could outperform existing rivals and often wait until an established investor has made a commitment that could prompt others to follow along.

During 2018, its first year in business, Vor delivered returns of 15 percent, a person familiar with the returns said. Since January the fund has returned roughly 10 percent and it made money in December 2018, a time when most hedge funds lost money, the source said.

The average hedge fund gained roughly 6 percent in the first three months of 2019 after having lost 5 percent last year, Hedge Fund Research data show.

Borealis plans to provide start-up capital to roughly four to six funds, including some that might pursue activist strategies, one of the people familiar with the matter said.

The firm is run by Scott Schweighauser and traces its roots to Aurora Investment Management, a fund of funds that once managed $ 14 billion in assets. Schweighauser was Aurora’s president and oversaw the firm’s liquidation in 2016 after its owner Natixis Global Asset Management decided to shut it down.

Borealis is getting into the seeding business at a time it is becoming ever tougher for new hedge funds to sign up clients. Firms like Blackstone (NYSE:) Group, Paloma Partners, Protege Partners and Reservoir Capital Group also make start-up investments with new hedge funds.

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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