China’s yuan gains after U.S. drops China FX manipulator label

By Yoruk Bahceli

LONDON (Reuters) – China’s yuan climbed to its highest level since July on Tuesday and the Japanese yen plumbed eight-month lows as the U.S. Treasury Department reversed its decision in August to designate China as a currency manipulator.

The Treasury Department’s new report on currency manipulators could help explain the reason for the Swiss franc surging to a 33-month high against the euro, some analysts said. [L8N29J36G] Washington included Switzerland on a watchlist, although other market participants said it had been expected and broader safe-haven flows were behind the franc’s move.

The announcement on the yuan came as Chinese Vice Premier Liu He arrived in Washington ahead of Wednesday’s signing with U.S. President Donald Trump of a preliminary trade agreement aimed at easing tensions between the two countries.

“Washington’s decision to lift its designation of currency manipulator on China has added to the positive mood that has been already in place ahead of the signing of the trade deal,” said Minori Uchida, chief currency strategist at MUFG Bank.

People familiar with the negotiations said its removal was an important symbol of goodwill for Chinese officials.

China has also pledged to buy almost $ 80 billion of additional manufactured goods from the United States over the next two years as part of a trade war truce, according to a Reuters source.

The dollar rose as much as 0.3% against the Japanese yen to 110.22 yen , its highest since late May versus a currency that tends to weaken when investors are buoyant. It last stood at 109.97 yen.

In onshore trade, the yuan strengthened to as high as 6.8731 per dollar , its strongest since late July. China’s central bank set the midpoint of the yuan’s daily trading band at 6.8954 per dollar on Tuesday, its strongest fixing since Aug. 1.

The also firmed to its strongest level in six months, hitting 6.8662 yuan before easing off .

Chinese forecast-beating trade data also helped to boost optimism about the economy and the yuan.

Despite the optimism, some analysts said there were signs of a bid for safety.

The Swiss franc rose to its strongest since April 2017 at 1.0763 against the euro (), up nearly 0.5%. It rose 0.4% versus the dollar .

Some analysts said this reflected nervousness, as risky emerging market currencies such as the South African rand and Turkish lira fared poorly.

“The interesting question is how long can this optimism last, how much further can it go. A lot surely has to be in the price,” said Jane Foley, senior FX strategist at Rabobank.

“If we were to get another rise in tensions between the U.S. and China and if we were to turn our attention to phase two (of the trade deal)… it’s very likely that we will see the renminbi falling again,” Rabobank’s Foley said, adding that the currency might face a low at the 7.18 level hit in September.

In Europe, sterling weakened further on Tuesday, hitting a seven-week low against the euro at 85.95 pence before recovering. ()

The currency has come under pressure from weak data releases, raising the chances of a cut to interest rates by the Bank of England. Money markets forecast an almost 50% probability of a cut at a meeting on Jan. 30.

The euro was mildly supported by risk-on sentiment, remaining off a two-week low of $ 1.10855 () hit on Friday, last trading at $ 1.1124.

The gained 0.1% to 97.43 ().

Let’s block ads! (Why?)

Forex News

U.S. to Lift Yuan Manipulator Tag Ahead of China Trade Deal

© Reuters.  U.S. to Lift Yuan Manipulator Tag Ahead of China Trade Deal © Reuters. U.S. to Lift Yuan Manipulator Tag Ahead of China Trade Deal

(Bloomberg) — President Donald Trump’s administration plans to lift its designation of China as a currency manipulator, people familiar with the matter said, removing an obstacle to a trade deal the two nations are set to sign this week.

The Treasury Department will make the move in a semi-annual report, expected to be released soon, after being delayed as the U.S. and China finalize a “phase one” trade pact, said the people, who spoke on condition of anonymity.

Treasury Secretary Steven Mnuchin in August first formally labeled China a currency-manipulator, a move that further escalated the trade war with Beijing after the country’s central bank allowed the yuan to fall in retaliation to new U.S. tariffs.

A Treasury Department spokeswoman declined to comment. A reporter for Fox Business Network earlier tweeted the news about Treasury’s plans.

Now that a deal is in sight, the designation is being lifted. The administration had at one point considered maintaining the label and instead announcing it would monitor the yuan with the possibility of lifting the designation in August of this year, according to the people.

The offshore strengthened to 6.883 per dollar on Monday.

Mnuchin’s August 2019 announcement prompted authorities in Beijing to increase transparency around how they manage the yuan. Some of that data has provided support for the Treasury’s view that the People’s Bank of China engages in competitive devaluations of its currency, the people said.

But economists have criticized the U.S. decision to call China a manipulator. The International Monetary Fund said in September the yuan is fairly valued and that there’s no evidence of manipulation. China’s weakening currency could also be attributed to a slowdown in growth.

China also doesn’t meet the criteria outlined in a 2015 U.S. law for formally designating a country a currency-manipulator. Mnuchin instead relied on a 1988 trade law that has a looser definition of currency manipulation to justify the claim. He did so after the yuan broke the 7 per dollar level for the first time since 2008, drawing Trump’s ire. Mnuchin had resisted using the label in the previous five reports he released.

The August announcement was made in a press release, outside the normal issuance of the report. That left currency strategists and policy experts without a full explanation for the decision. Treasury’s currency report examines 20 countries for possible currency manipulation, a number that was increased from 12 in May.

Trump was involved in drafting the press release, which on his direction refers to China as a “Currency Manipulator,” using capital letters, one of the people said.

When Treasury officials briefed congressional committees in August on their decision, they read quotes by Chinese leadership officials stating that they had all the necessary tools to prop up the yuan. According to the Treasury officials, those statements prove intent and serve as evidence that the country was manipulating its currency, two people familiar with the briefings said.

Mnuchin in October said that if a trade deal with China were signed, he would consider removing the manipulator tag, saying that signing an agreement would be “a big step in the right direction.”

(Updates with market move 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.

Let’s block ads! (Why?)

Forex News

U.S. Will Refrain From Labeling Vietnam a Currency Manipulator

© Reuters.  U.S. Will Refrain From Labeling Vietnam a Currency Manipulator © Reuters. U.S. Will Refrain From Labeling Vietnam a Currency Manipulator

(Bloomberg) — The U.S. is refraining from labeling Vietnam a currency manipulator based on new data the country provided the Treasury Department, according to a person familiar with the matter.

The determination is a win for Vietnam, which had been at risk of the designation amid plans by President Donald Trump’s administration to lower the threshold for labeling its trading partners manipulators.

In recent weeks, Vietnam provided additional data aimed at showing the U.S. Treasury it wasn’t holding down the value of the dong. Vietnam also sent a top envoy to meet with Secretary Steven Mnuchin on Thursday. It’s unclear what data the Vietnamese gave to the U.S.

Following the meeting, Mnuchin tweeted a photo of himself alongside Vietnamese Deputy Prime Minister Pham Binh Minh, saying they talked about “economic and trade relations.”

Treasury issues a report twice annually on foreign currencies. In the latest report, the number of countries under scrutiny for possible manipulation will rise to about 20 from 12, after Treasury altered one of the three criteria it uses to test for manipulation.

Previously, one of Treasury’s triggers to examine for currency manipulation was a current account surplus — the difference between the amount a country exports and imports — of 3% of gross domestic product. For the current report, they lowered the threshold to 2%.

The report was officially due to Congress in April. Mnuchin initially expected to meet that deadline and submitted the completed report to the White House for sign-off in early April. But the report has since been delayed and a date for its release hasn’t been announced.

A Treasury spokesmen did not reply to a request for comment.

Currency policy has emerged as Trump’s latest tool to escalate a push to rewrite global trading rules that he says have hurt American businesses and consumers. He has made foreign-exchange policy a key piece of trade deals with Mexico, Canada and South Korea, and it’s expected to be part of an agreement with China, should one be reached.

The administration on Thursday ramped up its focus on foreign exchange, proposing tariffs on goods from countries found to have undervalued currencies. The move would let U.S.-based companies seek anti-subsidy tariffs on products from countries found by the U.S. Treasury Department to be engaging in competitive devaluation of their currencies. Currently no country in the world meets that criteria.

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.

Let’s block ads! (Why?)

Forex News