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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Microsoft official says Iranian cyber activity has increased

Cyber activity originating in Iran and targeting entities across the United States “spiked” after the Trump administration announced its withdrawal from the nuclear deal last May, Tom Burt, Microsoft’s senior vice president of customer security and trust, said on Friday.

Speaking at an election security panel at the Aspen Security Forum in Colorado, Burt said the company saw “an incredible increase, a spike in activity, once the United States announced it was withdrawing from the nuclear treaty.”

Burt specified that the Iran-based actors’ cyber activity was not necessarily politically focused and “largely” targeted oil and gas organizations.  

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Earlier in the week, Microsoft published a blog post that said it had notified nearly 10,000 of its customers – which included businesses and consumer email accounts – that they had been targeted by nation-state attacks that originated, in order of volume, from Iran, North Korea and Russia.

“While many of these attacks are unrelated to the democratic process, this data demonstrates the significant extent to which nation-states continue to rely on cyberattacks as a tool to gain intelligence, influence geopolitics or achieve other objectives,” the post said.

The post also announced the demonstration, at the Aspen Security Forum, of a free open-source software system called ElectionGuard that the company said was designed to enhance voting security.

In his Friday remarks, Burt also said Microsoft had seen a “significant increase in activity” from North Korea as nuclear negotiations between Pyongyang and Washington were ongoing. He added that while the company had seen some activity originating from China, “we don’t see them [being] as active” as other countries, by volume.  

In its blog post, Microsoft said it had issued 781 notifications to customers using its AccountGuard service, which warns political and “democracy-focused” organizations worldwide about targeted cyber attacks – and that 95% of those attacks targeted U.S.-based organizations that were closely associated with the electoral process.

The slight majority of those attacks, too, Burt said, were perpetrated by Iran-based actors, followed, by volume, by Russia-based actors. While the Iranian activity was “not necessarily in any way” associated with hacking democratic processes, Burt said, and instead focused on energy interests, the Russia-based efforts reflected the “same pattern of engagement” observed ahead of the 2016 and 2018 U.S. and European elections.

“Almost every significant election cycle since 2016 we’ve seen the initial effort being to infiltrate NGOs, academics and think tanks likely to be influential,” which could be part of preparing for a disinformation campaign, Burt said.

“What we would say from the data we’ve seen so far is that we are seeing the early stages of the same kind of pattern of activity by the same actors that we’ve seen before, and we should expect it to continue,” he said.

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Olympics – Sponsorship rule change will not apply to everyone: Canadian official

© Reuters. A child plays in water near Olympic rings placed at Madureira Park ahead of the Rio 2016 Olympic Games in Rio de Janeiro © Reuters. A child plays in water near Olympic rings placed at Madureira Park ahead of the Rio 2016 Olympic Games in Rio de Janeiro

By Karolos Grohmann

LAUSANNE, Switzerland, (Reuters) – Changes in Germany to the Olympic rule that restricted sponsorship opportunities for athletes during a Games are not a “one-size-fits-all” decision for all countries, Canadian Olympic Committee President Tricia Smith said on Wednesday.

In February German athletes and their sponsors scored a major victory over the International Olympic Committee, earning more possibilities to advertise during the Tokyo 2020 Games and raising alarm bells within the Olympic body.

The German Cartel Office ruled the IOC and the German Olympic Sports Confederation (DOSB) were subject to existing competition laws and would need to grant more rights for promotional activities ahead of and during the Games.

While this decision sets a European precedent, it is not legally binding in other parts of the world.

“We had discussions with our athletes’ commission,” Smith, a lawyer, told Reuters in an interview on the sidelines of an IOC session.

“It may not be one-size fits-all. I don’t think it is, Certainly not in the changing landscape of this issue.

“The changes that will be proposed to rule 40 by the IOC will accommodate a lot of athletes’ wishes and allow them to continue their affiliation with long-term sponsors. I think it is a reasonable approach,” Smith said,

Rule 40 of the Olympic Charter states “no competitor, team official or other team personnel who participates in the Olympic Games may allow his person, name, picture or sports performances to be used for advertising purposes during the Olympic Games”.

It is seen as major advantage for Olympic sponsors, who sign up because until now they had exclusive exposure rights during the Games in all Olympic venues and areas. The German decision changes that for German athletes.

As a result the IOC has urged national Olympic committees to discuss the matter with athletes. It is not clear if and when the IOC will propose changes to Rule 40.

“The funding the IOC gets really funds the sports movement in the world. You have to make sure that is protected. The IOC puts 90 percent of their money back into sports,” Smith said.

“We have to be careful to protect that solidarity and the feedback I got from our athletes is they definitely recognize that.”

A four-time Olympian in rowing and a silver medalist at the Los Angeles 1984 Games, Smith is one of only a handful of women in charge of a national Olympic committee (NOC). In total, there are 206 NOCs.

“I have been in the sports system a very long time. I have been part of change and I have seen the change,” she said.

“Sport is one of the most powerful platforms to promote women and girls, to empower women. But there’s lot of work yet to do.

“I have seen the value that diversity brings to a board. Boards making decisions are stronger when they have those diverse perspectives on them.”

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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Top DR health official says recent American tourist deaths are from natural causes

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China official PMIs released – confirm the earlier leak

Official PMIs, private survey PMIs will follow up in coming days 

The data is here from earlier, when it leaked early:

All confirmed now:

Manufacturing Purchasing Managers Index (PMI), 49.4

  • expected 49.9, prior was 50.1

Non -manufacturing (services) Purchasing Managers Index (PMI), 54.3

  • expected 54.3, prior was 54.3

Composite Purchasing Managers Index (PMI), 53.3

  • prior was 53.4

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Top defense official suggests Russia violating nuclear test ban treaty

A top defense official suggested Russia might have illegally tested low-yield nuclear missiles, effectively violating a 1996 international ban on nuclear tests. 

Speaking Wednesday at the Hudson Institute, a Washington think tank, Lt. Gen. Robert P. Ashley Jr., director of the Defense Intelligence Agency (DIA), said the U.S. believes Russia “probably is not adhering to the nuclear testing moratorium.” The United Nations Comprehensive Nuclear Test Ban Treaty (CTBT) bans nuclear explosions of any size, for either civilian or military purposes.

“The U.S. has determined that Russia’s actions have strained key pillars of arms control architecture,” said Ashley. “Russia claims to be developing new warhead designs for strategic systems such as a new high-yield, earth-penetrating warhead to attack hardened military targets like the U.S. allied and Chinese Command and Control facilities.”

Trending News

Ashley contended that Russia’s current testing activities would help the country vastly improve its nuclear weapon capabilities. According to The Wall Street Journal, Trump administration officials say that view is also shared by other intelligence agencies in the U.S.

When pressed on the allegation by Journal reporter Michael Gordon, Ashley would only say Russia had the “capability” to conduct very low-yield nuclear tests, a capability which Russia, China and the United States have long possessed, according to the Arms Control Association. He did not say whether Russia has conducted or is conducting such tests.

“We believe they have the capability in the way they are set up,” Ashley said.

For years, Pentagon officials have been expecting the Russians to violate the treaty, according to CBS News’ David Martin, but Wednesday’s comments mark the first time the U.S. has explicitly said Moscow has failed to observe its commitments under the CTBT. The U.S. has signed but not ratified that treaty.

Critics of the pact, including national security adviser John Bolton, have said the treaty does not properly define a nuclear test and that other countries, including Russia and China, have a vastly different interpretation of what the treaty prohibits. Bolton previously claimed the CTBT offered “illusionary protections.”

The Kremlin responded to Wednesday’s remarks in kind.  

“The statement of the director of the United States Defense Intelligence Agency (DIA) about Russia’s alleged secret nuclear tests reveals the U.S. military’s declining professionalism,” head of the State Duma Defense Committee Vladimir Shamanov told Russia’s state-run Interfax news agency. 

“He just could not have made a more irresponsible statement. Nuclear tests cannot be carried out secretly with equipment, which is controlling these processes today,” Shamanov said Wednesday.

The U.S. has similarly accused Russia of violating the Intermediate-Range Nuclear Forces (INF) agreement. In February, President Trump said Washington was starting the process of withdrawing from the treaty in six months time. Many analysts say abandoning that 1987 treaty could effectively signal the start of a new arms race.

Asked what U.S. policy should be moving forward with regards to the escalating tensions with Russia, foreign policy expert Angela Stent of Georgetown University told CBS News senior national security contributor Michael Morell that the U.S. needs to have “realistic expectations” with Russia on arms control. 

“We have a major treaty that’s going to expire, the new START Treaty in 2021. These are areas where, as the world’s two nuclear superpowers with what, 93% of the weapons, we do need to work with the Russians,” Stent said on Morell’s podcast “Intelligence Matters.”

“We have to define narrowly where we need to work with them, and but not have any illusions about the fact that they’re going to move any closer to our view of the world than we have at the present,” she said.

Olivia Gazis and Tucker Reals contributed to this report. 

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USDA official: Trade talks 'positive' but still no clarity on IP and tech transfers

Comments from a US trade official

Trade talks are “positive” but there is still no clarity from Beijing on intellectual property, technology transfers and structural changes, according to a USDA official cited by Reuters.

The IP thing is such a tough one. What’s Beijing going to say? We are stealing from you but will stop? That’s not exactly a promise even worth making. I’m not sure there is a solution there other than to warn that if it continues there will be punitive actions. That said, everyone is stealing from everyone.

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Bank lending for 'real economy' key to boost China growth: central bank official

© Reuters. FILE PHOTO: Headquarters of the PBOC, the central bank, is pictured in Beijing © Reuters. FILE PHOTO: Headquarters of the PBOC, the central bank, is pictured in Beijing

SHANGHAI (Reuters) – China should encourage its banks to support smaller, private firms in the real economy, rather than forced lending or policies such as quantitative easing, a state newspaper quoted a central bank official as saying on Saturday.

"The central bank doesn’t wish to use administrative methods to require banks (to lend)," Sun Guofeng, head of the monetary policy department at the People’s Bank of China (PBOC), told the Financial News, a bank publication.

"It wants to establish positive encouragement mechanisms though monetary policy tools to encourage banks to actively increase their support for the real economy, especially toward smaller and privately-owned firms," Sun said.

The comments come a month after Sun wrote a commentary in which he argued that problems with timely capital replenishment, bank liquidity gaps and poor rate "transmission" are three major constraints on banks’ supply of credit.

In the interview with the Financial News, Sun said monetary policy transmission had "noticeably improved", showing that steps to enhance transmission mechanisms had been effective.

He said the central bank would increase the strength of innovation in monetary policy tools.

Perpetual bond issuance "is only one breakthrough" in reducing capital constraints on banks, Sun said, adding that "other methods" could be used in the future.

He said that quantitative easing was neither necessary nor possible at the moment, noting that under China’s financial system the significance of the central bank buying Chinese treasury bonds on the secondary market is limited, and that the PBOC is barred from buying the instruments on the primary market.

China’s banks made the most new loans on record in January following a series of moves to boost lending as authorities try to prevent a sharp slowdown in the world’s second-largest economy.

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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European official says EU-UK contact to aid Brexit deal is at 'all levels'

Bloomberg reports the headline, citing an anonymous European official

Latest word doing the rounds is that the EU is set to provide the UK with a letter on assurances for the backstop by next Monday, about 24 hours before the meaningful vote.

However, it must be said that these assurances will not be legally-binding as there has been no consultation with other EU27 members on the matter and these will merely come up to “clarifications” on the withdrawal agreement.

That said, unless European leaders surprise markets by offering an olive branch to Theresa May, she’s still going to fall short of gathering enough support in next week’s vote.
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Yen May Hit 100 Against U.S. Dollar, Ex-BOJ Official Says

© Bloomberg. Japanese 10,000 yen, left, and U.S. 100 dollar banknotes are arranged for a photograph in Tokyo, Japan. Photographer: Tomohiro Ohsumi © Bloomberg. Japanese 10,000 yen, left, and U.S. 100 dollar banknotes are arranged for a photograph in Tokyo, Japan. Photographer: Tomohiro Ohsumi

(Bloomberg) — There is a good chance the yen will strengthen to 100 against the dollar in coming months as slowing global growth and U.S.-China trade tensions keep investors on edge, a former senior Bank of Japan official said.

While that level would be tolerable, there is little the depleted BOJ can do about further yen strength or a serious downturn in the economy, Kazuo Momma, former executive director of the central bank, said in an interview with Bloomberg Tuesday.

“However bad Japan’s economy gets, the BOJ can’t add stimulus anymore,” Momma said.

It would also be hard to justify any direct government intervention in the yen to Japan’s global trading partners unless a disorderly move threatens an economic collapse, as when the country was struck by an earthquake and tsunami in March 2011, Momma said.

Empty Bag

Momma said the BOJ would have few options to fight an outright recession — which he deemed unlikely — because after six years of radical stimulus its arsenal is effectively empty and side effects are piling up in the nation’s financial system and markets.

“There are no effective policy measures whose benefits would clearly exceed the side effects,” he said.

Nervous investors last week pushed the yen, seen as a haven asset in turbulent times, to its strongest level in nine months. A weaker currency and global demand have been key drivers of Japan’s export-dependent economy in recent years, fueling record corporate profits and contributing to growing business investment.

Even without a recession, the BOJ faces a challenging environment ahead, Momma said. Markets will likely remain volatile during the first half of the year, he said, and the BOJ will probably cut its quarterly projections for growth and inflation as its policy board meets on Jan. 22-23.

With little else the central bank can do, BOJ Governor Haruhiko Kuroda and his fellow policy makers will remain observers for much of this year, Momma said. If the economy needs help, it’s time for the government to step up with additional fiscal spending, he said.

Inflation Target (NYSE:)

Regardless, the BOJ’s 2 percent inflation target will remain out of reach — and it will be difficult to achieve inflation of even 1 percent when fresh food and energy prices are stripped out, said Momma, who also served as BOJ chief economist.

The yen traded at 108.84 per dollar as of 4:11 p.m. in Tokyo, which is slightly stronger than Japan’s big manufacturers’ expectations of 109.41 for this fiscal 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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