Yuan wobbles on Trump trade comments, details of China rate reforms awaited

HONG KONG (Reuters) – The yuan wavered on Monday after U.S. President Donald Trump said he was not ready yet to make a trade with China.

Traders were also cautious ahead of the debut of China’s new benchmark lending rate on Tuesday, which was announced at the weekend.

Analysts believe the reforms will open the door to rate cuts, possibly as early as Tuesday, but are divided over the size of any initial reduction and how much it may help struggling smaller companies in the near term.

Spot yuan traded at 7.0447 per dollar at midday, pretty much unchanged from the last session close and 0.12 percent away weaker than the midpoint , which was set by the People’s Bank of China at 7.0365.

The central bank on Saturday unveiled long-awaited interest rate reforms to help lower borrowing costs for companies and support slowing growth, which has been dragged by its protracted trade war with the United States.

The revamped loan prime rate (LPR), effective on Tuesday and linked to rates in medium-term lending facility (MLF), is the equivalent of a 45 basis point rate cut on loans, ANZ analysts wrote in a note on Monday. Several traders said they expect the new LPR to trim by 10 to 15 basis points.

The tweak will help achieve the State Council’s goal of easing financing costs for small businesses by 1 percentage point, but tax cuts will also shoulder part of that, according to a Shanghai-based trader.

“We need to hear more about the supplementary measures,” to gauge how far LPR and MLF rates will fall, said another trader in Shanghai.

However, unlike more open markets such as the United States, China’s capital control will likely cap the pressure from lower interest rates on its managed currency, said a Hong Kong-based trader, adding “it will trade where the PBOC wants it to be.”

Traders said the U.S.-China trade talks will continue to dominate the yuan’s direction in the near term.

White House economic adviser Larry Kudlow said on Sunday trade officials from the two countries would speak within 10 days and a Chinese delegation is flying to the United States to follow up.

But Trump said on the same day he is “not ready” for a deal with Beijing, hinting again that he would like to ongoing protests in Hong Kong resolved first.

Trump also said he would not like to deal with Huawei Technologies Co Ltd – even after Reuters and other media outlets reported on Friday the U.S. Commerce Department is expected to extend a reprieve for the company to buy supplies from U.S. companies.

The was trading 0.14 percent softer than the onshore spot at 7.0545 per dollar.

The global () rose slightly to 98.207 from the previous close of 98.142.

US China interest rate – Aug 19, 2019 – https://fingfx.thomsonreuters.com/gfx/mkt/12/4892/4849/US%20China%20interest%20rate%20-%20Aug%2019,%202019.jpg

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China unveils reform to help firms borrow more cheaply

BEIJING (Reuters) – China’s central bank said on Saturday it will improve the mechanism used to establish the loan prime rate (LPR) in a move to further lower real interest rates for loans in a market-based way.

China’s LPR quotations will be based on rates of open market operations, and the national interbank funding center will be authorized to publish the rate from Aug. 20, the People’s Bank of China (PBOC) said in a statement on its website. It added the rate will be published every month on the 20th, effective this month.

Banks must set rates on new loans by mainly referring to the LPR and use LPR as the benchmark for setting floating lending rates, the PBOC said, adding that banks will be barred from setting any hidden floor on lending rates in a coordinated way.

The central bank will incorporate LPR application into its macro-prudential assessment (MPA) to urge banks to use LPR pricing.

The move followed pledges from China’s State Council on Friday that the country will rely on market-based reform measures to help lower real interest rates for companies.

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Exclusive: China curbs gold imports as trade war heats up

© Reuters. FILE PHOTO: A sales assistant places gold ornaments at Caibai Jewelry store in Beijing © Reuters. FILE PHOTO: A sales assistant places gold ornaments at Caibai Jewelry store in Beijing

By Peter Hobson and Yawen Chen

LONDON/BEIJING (Reuters) – China has severely restricted imports of gold since May, bullion industry sources with direct knowledge of the matter told Reuters, in a move that could be aimed at curbing outflows of dollars and bolstering its yuan currency as economic growth slows.

The world’s second largest economy has cut shipments by some 300-500 tonnes compared with last year – worth $ 15-25 billion at current prices, the sources said, speaking on condition of anonymity because they are not authorized to speak to the media.

The restrictions come as an escalating trade confrontation with the United States has dragged China’s pace of growth to the slowest in nearly three decades and pressured the yuan to its lowest since 2008.

China is the world’s biggest importer of gold, sucking in around 1,500 tonnes of metal worth some $ 60 billion last year, according to its customs data – equivalent to one-third of the world’s total supply.

Chinese demand for gold jewelry, investment bars and coins has trebled in the last two decades as the country has rapidly become wealthier. China’s official gold reserves meanwhile rose fivefold to nearly 2,000 tonnes, according to official data.

Chinese customs figures show it imported 575 tonnes of gold in the first half of the year, down from 883 tonnes in the same period of 2018.

In May, China imported 71 tonnes, down from 157 tonnes in May 2018. In June, the last month for which data is available, the decline was even sharper, with 57 tonnes shipped compared with 199 tonnes in June last year.

The bulk of China’s imports – from places such as Switzerland, Australia and South Africa and usually paid for in dollars – are conducted by a group of local and international banks given monthly import quotas by the Chinese central bank.

But quotas have been curtailed or not granted at all for several months, seven sources in the bullion industry in London, Hong Kong, Singapore and China said.

“There are virtually no import quotas now issued in China,” one source said. In June and July “next to nothing” was imported by banks, they said.

The Chinese central bank did not respond to a written request for comment.

Imports have not fallen to zero because some banks may still be receiving some quotas and other import channels, such as refineries receiving semi-pure mined gold, remain open, four of the sources said.

GRAPHIC: Chinese gold imports – https://tmsnrt.rs/2YEVuhE

They said China’s likely motive for restricting gold shipments was to help limit the amount of money leaving the country amid a plunge in the value of the yuan.

Beijing has previously taken steps to curb capital outflows when its currency weakened, such as squeezing the supply of , clamping down on import invoicing and encouraging banks to send home dollars held overseas.

It has also restricted gold import quotas before – most recently in 2016 after the yuan weakened sharply, bullion bankers said.

But not to this degree. It’s “unprecedented,” said an industry source in Asia.

“Gold going in is money going out,” said one of the people, adding that Chinese buyers tend buy dollars to pay for metal. “It’s all linked to what’s going on in terms of how the central bank is handling the currency,” the person said.

The yuan has sunk more than 10% against the dollar since early last year and the central bank this month allowed it to slide below the key threshold of 7-per-dollar for the first time in more than a decade.

While there is no clear official data to gauge capital outflows from China, a popular measure is a component in its balance of payments called errors and omissions, which point to outflows of $ 88 billion in the first three months of this year, the most on record.

GRAPHIC: Chinese capital outflows – https://tmsnrt.rs/2YL19Tn

With foreign exchange reserves at $ 3.1 trillion – the world’s largest – China has the capacity to defend its currency.

But restricting gold imports is an easy way to curtail outflows without affecting people’s lives, bullion bankers said.

So far the effect on the wider gold market has been muted.

A sharp rise in prices has prompted many in China to cash in their gold for profit, boosting local supply, while resurgent demand elsewhere in the world has been strong enough to soak up extra metal.

Slowing global economic growth is pushing more institutional investors, particularly in Europe and North America, toward gold, traditionally seen as a safe place to invest, while central banks are buying at the fastest pace in half a century.

However, the cost of gold in China could rise if the surge in recycled supply fades before import restrictions are lifted, and supply could rapidly exceed demand outside China if institutional investors slow their purchases.

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Forex – Japanese Yen Rises Despite Positive Trade News; China Data Underperform

© Reuters.  © Reuters.

Investing.com – The Japanese yen rose on Wednesday in Asia despite positive trade news. Underperforming Chinese data and a political crisis in Hong Kong supported the safe-haven currency.

The pair fell 0.2% to 106.50 by 1:23 AM ET (05:23 GMT).

Tariffs on Chinese goods are being delayed to Dec. 15, while certain products are being removed due to “health, safety, national security and other factors,” a statement said overnight.

The tariffs were originally scheduled to come into effect in early September.

The news sent stock markets higher. The yen, which usually moves in directions opposite to most risk assets, also surprisingly rose.

The safe haven yen was already trading higher against the U.S. dollar overnight as investor sentiment was shaken by political unrest in Hong Kong.

On Tuesday, protesters managed to close down Hong Kong’s airport for a second day. Overnight, U.S. President Donald Trump tweeted that the Chinese government is moving troops to the border with Hong Kong.

Hong Kong’s leader Carrie Lam said earlier this week that further violence involving protests could push the territory “down a path of no return”.

“If we think only about the United States and China, there could be more room for dollar gains and yen losses, but this does not mean trade frictions have been resolved,” said Tohru Sasaki, head of Japan markets research at JP Morgan Securities in Tokyo, in a Reuters report.

“There are still a lot of geopolitical risks, such as Hong Kong, Brexit, and the Iranian situation. I don’t expect significant (risk-on) moves.”

Meanwhile, weaker-than-expected Chinese data also provided additional boost to the safe-haven yen.

Growth of Industrial production and retail sales both came in lower than expected, official data showed on Tuesday.

The Chinese yuan gained despite the data. The pair last traded at 7.0194, down 0.3%.

The that tracks the greenback against a basket of other currencies inched up 0.1% to 97.678.

The pair and the pair were down 0.2% and 0.1% respectively.

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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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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Yen buoyed by China jitters; sterling under water

By Wayne Cole

SYDNEY (Reuters) – The dollar remained on the defensive against the safe-haven yen on Monday as the Sino-U.S. trade dispute looked set to drag on with no settlement in sight, while holidays in Japan and Singapore made for very thin trading.

Confusion still lingered after U.S. President Donald Trump on Friday said he was not ready to make a deal with China and even called a September round of trade talks into question.

Goldman Sachs (NYSE:) over the weekend cut its forecast for U.S. economic growth, warning that a trade deal was unlikely before the 2020 presidential election and that the risks of a recession were increasing.

“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in a note.

All eyes will be on Chinese figures on retail sales and industrial output due Wednesday to gauge the impact of the long-running tussle on domestic activity.

Beijing has allowed its yuan to ease in recent weeks as an offset to the tariffs, pressuring emerging market currencies across Asia and boosting the yen.

The dollar edged up to 7.1034 yuan in offshore trade early on Monday as investors waited to see where the Chinese central bank would chose to fix it .

The dollar went the other way against the yen, easing to 105.40 after hitting a seven-month low around 105.25 on Friday. The dollar was hardly alone, with the euro down at 118.16 yen () and near its lowest since April 2017.

Likewise, sterling had sunk to depths not visited since 2016 at 126.69 yen () having shed over eight yen in little more than two weeks.

The pound struck a two-year trough on the dollar on Friday after data showed the UK economy unexpectedly contracted in the second quarter, only adding to the bearishness over Brexit and the chance of a no-deal exit. [GBP/]

Sterling was last at $ 1.2020 and eyeing support at $ 1.1979, which marks a low from January 2017.

The Telegraph reported Labour MPs had been told to cancel all travel in early September in anticipation of Jeremy Corbyn tabling a motion of no confidence in the government.

The euro was steady on the dollar at $ 1.1200 (), bound between resistance at $ 1.1249 and support at $ 1.1175.

Politics remained a drag with the prospect of snap elections in Italy up in the air as opposition built to League chief Matteo Salvini’s plans for a vote.

Another hurdle will be Germany’s gross domestic product figures on Wednesday where a contraction is a real risk given a steep drop in factory output in June.

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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IMF says China may need more stimulus if trade war worsens

© Reuters. Customers are served at a counter at a currency exchange store in Shanghai © Reuters. Customers are served at a counter at a currency exchange store in Shanghai

By David Lawder

WASHINGTON (Reuters) – The International Monetary Fund on Friday stood by its assessment that the value of China’s yuan was largely in line with economic fundamentals, but an IMF official said the fund was encouraging China to pursue a more flexible exchange rate with less intervention.

James Daniel, director of the IMF’s China department, said that an assessment of China’s economic policies found the yuan exchange rate in 2018 to be “not significantly over-valued or under-valued.”

The IMF’s views on the yuan are at odds with those of its largest shareholder, the United States, which this week declared China a “currency manipulator” after it allowed the yuan to slip below 7 to the dollar to 11-year lows.

U.S. Treasury Secretary Steven Mnuchin is seeking to engage the IMF to help “correct” an unfair trade advantage from Beijing’s currency actions, but Daniel declined to say how the IMF was responding to the request.

“Our discussions with the U.S. Treasury are ongoing on a range of issues,” Daniel told reporters on a conference call, echoing an earlier statement from an IMF spokesperson.

The IMF said in the report that a worsening of trade tensions with the United States could put China’s economic and financial stability at risk, making new fiscal stimulus measures from the government warranted.

The IMF said if the United States were to impose 25% tariffs on a remaining $ 300 billion list of Chinese imports, this would reduce China’s growth by around 0.8 percentage points over the following 12 months, driven by a sharp fall in demand and a tightening of financial conditions. Negative global spillovers could be significant, it added.

Daniel said that a 10% tariff on this category of goods — as U.S. President Donald Trump intends to impose on Sept. 1 — could result in a 0.3 percentage point cut to growth.

Weighed down by weak demand at home and abroad, China’s growth slowed to 6.2% in the second quarter, a near 30-year low.

More exchange rate flexibility could help China deal with these external pressures, freeing up monetary policy to deal with domestic demand conditions, Daniel said.

He also said the IMF was pressing China for structural reforms to its economy, including opening more sectors to foreign competition and reducing the role of the state in certain industry — goals also broadly sought by the Trump administration.

“We see continued rebalancing and opening up by China and increased exchange rate flexibility as being in China’s own interests and also benefiting the global economy.”

IMF directors in a statement agreed with staff assessments that China’s external position in 2018 was broadly in line with fundamentals.

But they also called for more transparency in China’s exchange rate policies, the IMF said, with some seeking disclosures of China’s foreign exchange market interventions.

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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China suspends mainland movies, stars from Taiwan’s Golden Horse Awards

China suspends mainland movies, stars from participating in Taiwan's Golden Horse Awards China suspends mainland movies, stars from participating in Taiwan’s Golden Horse Awards

SHANGHAI/TAIPEI (Reuters) – China’s film regulator on Wednesday said it was suspending mainland Chinese movies and their personnel from participating in Taiwan’s annual Golden Horse Awards this year, without giving a reason.

The China Film Administration made the announcement in a statement on its official WeChat account.

The move comes after the event, the Chinese-speaking world’s version of the Oscars, last year became a lightning rod for questions about Taiwanese independence, sparking a debate between Taiwanese and mainland stars as well as netizens.

The state of ties between Beijing and the self-ruled island has since become more tense, with China announcing that it would stop issuing individual travel permits for Taiwan to Chinese travellers last week.

“From an industry point of view, the Golden Horse was a good platform for exchanges on films among mainland, Taiwan and Hong Kong,” said Dong Shu, a Shanghai-based film critic.

“But some people in Taiwan had to get politically sensitive content on it, things that crossed red lines for mainland China, thus the nature of this award has been changed.”

Taiwan is self-governed and has a democratically elected leadership, but China claims the island as a breakaway province and has not ruled out the use of force to ensure unification. The question of Taiwanese independence is one of Beijing’s most sensitive political concerns.

China’s content regulator has also been taking an extra-cautious stance over its media industry in the run-up to the 70th anniversary of the founding of the People’s Republic, on Oct. 1, pulling off a few blockbusters and banning “entertainment-driven” historical dramas and idol dramas.

Reports of the suspension soon became a trending topic on China’s Weibo, a Twitter-like microblogging service, with one related hashtag receiving more than 68 million views Wednesday morning.

“Taiwan made this award political first, don’t we have a right to punch back?” said a Weibo commentator.

Others expressed disappointment at the decision.

“Politics aside, this is a lose-lose situation. There isn’t an impartial and matchable award in mainland China, what a pity!” said another commentator.

Reuters was not immediately able to reach the organisers of the Golden Horse Film Festival for comment.

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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Farmers fear impact of escalating trade war with China

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China Yuan Fixing Shows Preference for Stability Over Weakness

© Reuters.  China Yuan Fixing Shows Preference for Stability Over Weakness © Reuters. China Yuan Fixing Shows Preference for Stability Over Weakness

(Bloomberg) — The Chinese authorities sent a clear signal via the daily currency fixing that it wants to maintain stability in the yuan as the U.S. amps up pressure on the nation’s imports.

The People’s Bank of China set the reference rate for onshore trading stronger than 6.9 per dollar on Friday, even after the offshore currency tumbled to as low as 6.9786 in the wake of President Donald Trump’s announcement about new tariffs. That helped widen the gap between the onshore spot rate and the fixing to the most since June 10.

The PBOC hasn’t set the fixing weaker than 6.9 since December, suggesting officials are reluctant to use yuan weakness as a weapon in the trade war, especially in the run-up to the 70th anniversary of the founding of the People’s Republic.

The yuan was down 0.55% at 6.9359 a dollar as of 11:29 a.m. in Shanghai, taking the drop this week to 0.8%.

A gauge of expected swings in the yuan over the next month slid to the lowest level in nearly two years on Wednesday.

A gauge of expected swings in the yuan over the next month slid to the lowest level in nearly two years on Wednesday.

A gauge of expected swings in the yuan over the next month slid to the lowest level in nearly two years on Wednesday.

A gauge of expected swings in the yuan over the next month slid to the lowest level in nearly two years on Wednesday.

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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