Sterling sparkles after election poll, yuan up on trade deal reports

© Reuters. The Wider Image: African churches boom in London's backstreets © Reuters. The Wider Image: African churches boom in London’s backstreets

By Stanley White

TOKYO (Reuters) – The pound rose to a three-and-a-half year high versus the euro and the highest in more than a year versus the dollar after exit polls suggested a win for the Conservatives, which should help ensure the UK’s smooth exit from the European Union.

The rose in offshore trade and the Japanese yen fell after a source told Reuters that the United States and China have agreed some tariff reductions and a delay on tariffs set to go effect on Dec. 15.

The early results suggest the election will relieve almost four years of uncertainty about when Brexit would take place, which should be supportive of the pound.

A successful scaling back of trade tension would relieve one major headwind to economic growth, which suggests lower demand for the safe-haven yen. Avoiding new tariffs should also be a boost to China’s slowing economy, which should draw more investors to the yuan.

“We’ve already seen a strong reaction in the pound from the exit poll,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“We also see a rise in stock futures in reaction to two very important pieces of news for markets. This should support global growth. The yuan can also go higher, but it depends on how much dollar strength we get.”

Against the euro, sterling () rose around 2% to as high as 82.80 pence, the highest since July 2016, which is shortly after the Brexit referendum that hammered the currency.

The pound surged by 2.2% to $ 1.3474, reaching the highest since May 2018.

The pound plunged more than 10% in the immediate aftermath of Britain’s vote to leave the European Union in June 2016, while $ 2 trillion was wiped off world markets.

The exit poll, which suggested UK Prime Minister Boris Johnson would get a majority of 86 – the largest of any Conservative leader since Margaret Thatcher won in the 1980s – should empower him to deliver Brexit on Jan. 31.

Official results will be declared over the next seven hours.

Even if Brexit is completed on Jan. 31, there is still some uncertainty because Britain will then enter a transition period during which it will negotiate a new relationship with the remaining 27 EU states.

In the offshore market, the Chinese yuan rose 0.33% to 6.9273 per dollar, after surging on Thursday to the highest since Aug. 1 due to relief about a resolution to trade friction.

As part of the trade deal, China has also agreed to purchase $ 50 billion of U.S. agricultural goods next year, sources familiar with the talks told Reuters.

The yuan rallied and the yen fell late on Thursday after Bloomberg News reported that U.S. President Donald Trump signed off on a trade deal with China that will delay a new round of tariffs scheduled for Dec. 15.

A trade dispute between the United States and China over Chinese trading practices that Washington says are unfair has dragged on for almost two years, making the stand off the biggest risk to the global economy.

Against the dollar, the yen fell to 109.595, the weakest since Dec. 2.

The () against a basket of six major currencies fell 0.35% to 96.736, approaching the lowest since July this year.

Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

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Yuan stable as China PMI expands after months of gloom

© Reuters.  © Reuters.

Investing.com – The Chinese yuan stayed relatively steady as forex markets launched December with good news for China’s economy.

China’s (PMI) was recorded at 51.8 in November, up from a reading of 51.8 the month earlier. On Friday, the official manufacturing PMI released by the National Bureau of Statistics (NBS) recorded a reading of 50.2, topping the 50 level that suggests expansion for the first time since April. The official non-manufacturing PMI came in at 54.4, the highest level since March.

The US dollar stayed little changed on Monday in Asia following the release of strong economic data in the US the previous week. The traded marginally higher early in the day, up 0.03% to 98.20 by 8:41 PM ET (01:40 GMT).

US-China trade talks remained in focus after Global Times, a nationalist English-language tabloid in China with links to the Communist Party of China, tweeted that any phase one trade deal would require that the US roll back tariffs. The next batch of American tariffs on Chinese goods are due to take effect on Dec. 15.

Last week, U.S. President Donald Trump approved two bills that back Hong Kong’s anti-government protestors. The bills are more symbolic and have limited practical implications but China has vowed to take strong measures in retaliation, although it has not yet announced any specific action.

In mainland China, The People’s Bank of China (PBOC) set the reference rate for the yuan, the midpoint around which the currency is allowed to trade, at 7.0262, slightly weaker than the 7.0247 set on Friday.

The pair was down 0.14% to 1.2915. The Pound has taken a number of hits recently as polls continue to suggest that Boris Johnson’s Conservatives are poised to win in elections on December 12, paving the way for a rapid Brexit.

The was up 0.4% to 1.1018.

The pair also gained in morning trading and was up 0.16% to 109.69. Signs continue to point towards more easing from the Bank of Japan.

The pair was up 0.16% to 0.6774 while the pair gained 0.37% to 0.6444.

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 will not resort to competitive yuan devaluation: Premier

BEIJING (Reuters) – China will keep its yuan currency basically stable within a reasonable range and will not resort to competitive devaluation, Premier Li Keqiang said on Friday, according to the state TV.

Beijing will push forward market-based currency reform, China Central Television cited Li as saying in a meeting with Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF).

China would further open up its banking, securities and insurance sectors, said Li, adding that it was working toward the goal of fully lifting restrictions on foreign ownership in these sectors.

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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Yen gains, yuan down as trade woes, Hong Kong strife sap risk appetite

© Reuters. FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration © Reuters. FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration

By Stanley White

TOKYO (Reuters) – The yen rose against the dollar on Thursday after sources close to the White House told Reuters that a U.S.-China trade deal is unlikely this year, shattering investor hopes a partial agreement was imminent and spurring demand for safe havens.

The yuan fell to a three-week low in onshore trade on worries the failure to reach a deal to roll back U.S. tariffs could further harm China’s stuttering economy.

Political tensions between Beijing and Washington were also keeping investors on edge after a source told Reuters that U.S. President Donald Trump is expected to sign into law two bills intended to support anti-government protesters in Hong Kong.

Hong Kong has been rocked by months of increasingly violent protest against Chinese rule of the former British colony. The passage of a U.S. law supporting the protesters is bound to anger Beijing and potentially undermine efforts to secure a trade deal.

“Friction between the United States and China is starting to spread from trade to questions about China’s human rights,” said Tsutomu Soma, general manager of fixed income business solutions at SBI Securities Co in Tokyo.

“This is the perfect opportunity to book some profits and unwind some risk-on trades, which is supportive for the yen and government bonds.”

The yen rose 0.15% to 108.46 per dollar on Thursday.

The Japanese currency briefly pared gains after Bloomberg reported Chinese Vice Premier Liu He as saying he is cautiously optimistic about a preliminary trade deal. Markets, however, turned around again when it became clear the comments were made on Wednesday night in Beijing.

The dollar was steady at $ 1.1077 versus the euro () and was quoted at $ 1.2931 against the British pound .

Completion of a “phase one” U.S.-China trade deal could slide into next year, trade experts and people close to the White House told Reuters on Wednesday, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.

Trump and U.S. Treasury Secretary Steven Mnuchin said in an Oct. 11 news conference that an initial trade deal could take as long as five weeks to ink.

Just over five weeks later, a deal is still elusive, and negotiations may be getting more complicated, trade experts and people briefed on the talks told Reuters.

Washington and Beijing have imposed tariffs on each other’s goods in a bitter dispute over Chinese trade practices that the U.S. government says are unfair.

The tariffs have slowed global trade, raised the risk of recession for some economies, and roiled financial markets.

The next date to watch is Dec. 15, when U.S. tariffs on some $ 156 billion in Chinese goods are scheduled to take effect.

, which like the yen is often bought as a safe-haven during times of uncertainty, tacked on 0.1% to $ 1,473.93 per ounce, underlining investors’ reluctance to take on risk.

In the onshore market, the yuan fell to 7.0450 versus the dollar, the weakest since Nov. 1, before steadying at 7.0400. Offshore, the yuan slipped to 7.0533 per dollar, the lowest since Nov. 5, and then pared its losses.

Besides the tariff row, Hong Kong has emerged as another flashpoint that some traders say could further worsen U.S.-China relations.

What started as a protest against a proposed China extradition bill has widened into almost daily battles with the Hong Kong police over a perceived erosion of liberties under Chinese rule. The police have come under criticism after one protestor was shot at close range.

Beijing denies meddling in Hong Kong’s affairs and blames foreign governments for fuelling the unrest.

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Yuan to weaken further as U.S. and China dig in on trade war: Reuters poll

By Sumanto Mondal and Hari Kishan

BENGALURU (Reuters) – Chinese authorities will maintain their tight grip on the yuan and allow it to weaken further against the dollar to fight an ongoing trade war with Washington and a slowing domestic economy, a Reuters poll of strategists showed.

In response to U.S. tariffs on $ 30 billion of Chinese imports that came into effect this week, the People’s Bank of China set its yuan mid-point at an 11-1/2-year low versus the dollar.

That follows a decision last month to let the currency slip past the 7-per-dollar rate, a barrier few expected to be breached, reinforcing the view it will be a drawn-out battle. The PBOC allows the yuan to trade in a 2% range around a mid-point it fixes against the dollar each day.

The latest Aug. 29-Sept. 4 Reuters poll of nearly 60 strategists showed the yuan is expected to trade around 7.19 to the dollar in six months, over 0.5% weaker than Wednesday’s 7.15, before readjusting to 7.16 in a year.

That marks the third month in a row where analysts have lowered their yuan outlook.

“For currency markets, the last month’s tariff-inspired yuan fall is much more important than it would have been were China still a minor player in global trade,” said Kit Juckes, FX strategist at Societe Generale (PA:) in London. “U.S. President Donald Trump will have to wait longer – perhaps a lot longer – before he gets the weaker dollar he craves.”

Nearly two-thirds of analysts who answered an additional question said China would fight the U.S. trade war by depreciating the yuan further.

“There’s a risk the U.S. retaliates to yuan weakness, or to other currencies falling as a result of the yuan weakening. More tariffs could see more yuan weakness and more risk President Trump reacts to that, too. Dominos can fall over,” added Juckes.

The most pessimistic 12-month view, 7.75 per dollar in the latest and previous surveys taken after the yuan breached the 7 per dollar rate, is the weakest since polling began more than a decade ago for the currency. That suggests a clear bias toward a further downgrade.

While a weaker yuan is good for the world’s largest exporter of manufactured goods, a weaker currency is likely to be limited in its ability to cushion the blow from import taxes imposed by the United States.

“Weakening the yuan can’t benefit exporters if the tariffs are so high that they lose the orders altogether,” noted Tim Condon at ING in Singapore.

To counter the economic slump, the PBOC reformed its key interest rates last month, establishing the loan prime rate as its main policy rate, aimed at lowering real interest rates for companies as part of broader market reforms.

About 70% of respondents who answered a separate question said China’s decision to change its interest rate system was not a step toward allowing the yuan to trade more freely.

(Polling by Anisha Sheth and Shaloo Srivastava; Editing by Sam Holmes)

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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Yuan Poised for Worst Month on Record After 7 Barrier Broken

© Reuters.  Yuan Poised for Worst Month on Record After 7 Barrier Broken © Reuters. Yuan Poised for Worst Month on Record After 7 Barrier Broken

(Bloomberg) — China’s yuan is headed for a record monthly plunge as an intensifying trade war with the U.S. damages investor confidence.

The currency has plummeted 3.9% this month, the biggest loss since January 1994, when the modern exchange rate regime was adopted. The slump past the 7 level for the first time since the financial crisis comes as China-U.S. trade tensions escalate. Fresh signs of a slowing economy and bets on further monetary easing have also helped fuel the retreat.

Without any clear signs of progress in trade negotiations, the “outlook will deteriorate, both for the Chinese economy and markets,” Dariusz Kowalczyk, senior emerging market strategist at Credit Agricole (PA:), wrote in a note dated Monday. The yuan may decline in the near term to 7.3 per dollar, he said.

There are signs the People’s Bank of China is growing uncomfortable with the yuan’s drop. It set the daily reference rate at stronger-than-expected levels for a fifth straight session on Tuesday. Sustained weakness risks creating a cycle of capital outflows and more currency weakness, a scenario that may lead to financial instability.

The yuan plunged to the weakest level since February 2008 this week after President Donald Trump and the Chinese government exchanged tariff threats on Friday. The PBOC may allow the currency to slide to 7.5 by the end of this year as it uses depreciation to counter the tariffs, Bank of America Merrill Lynch (NYSE:) strategists led by Claudio Piron wrote in a note. The currency slipped 0.14% to 7.1621 a dollar as of 11:55 a.m. in Shanghai.

The yuan’s 14-day relative strength against the dollar has fallen below 30, reflecting strong selling momentum. The index has dipped below this level for 14 days in August, the most in a month since May.

Not only has the yuan weakened against the greenback, it’s also at a record low against a basket of its peers. The Bloomberg replica of the CFETS Index — which tracks the yuan against the currencies of 24 trading partners — has fallen to 91.1, the lowest level since the gauge was introduced in 2015.

The offshore yuan’s forward points, a gauge of liquidity and bearish bets on the currency, jumped to the highest level since October last week. The forward curve could rise, as a tumbling yuan prompts more Chinese companies to buy foreign exchange and as Beijing tightens liquidity to squeeze short sellers, Citigroup Inc (NYSE:). strategists led by Sun Lu wrote in a note.

Still, the PBOC can rein in depreciation if it wants. On Tuesday, the central bank set its daily fixing 204 pips stronger than the level that analysts and traders projected in a Bloomberg survey. That is the largest such bias since June. To beat back bears, Beijing can also issue verbal warnings, sell bills in Hong Kong to boost the cost of shorting and directly intervene by dumping the greenback.

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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Forex – Yuan Pares Back Losses as Trade Tensions Ratchet Down

© Reuters.  © Reuters.

Investing.com – China’s onshore and pared back steep losses against the dollar on Monday, after comments by U.S. President Donald Trump eased some fears over the latest escalation in the trade war between the world’s two largest economies.

Trump said Beijing had contacted U.S. trade officials overnight to say they wanted to return to the negotiating table, but China’s foreign ministry subsequently said it was not aware of any U.S. – China phone calls.

Markets took Trump’s comments as a positive sign for chances for de-escalation after both sides announced additional tariffs on each other’s goods over the weekend.

Earlier Monday, Chinese Vice Premier Liu He said that China is willing to resolve its trade dispute with the U.S. through “calm” negotiations and resolutely opposes the escalation of the conflict.

At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs, but the White House later clarified that the president’s only regret was not increasing tariffs more than he had already.

Trump is now set to hold a joint news conference with French President Emmanuel Macron later on Monday.

The latest trade escalation overshadowed a pledge by Federal Reserve Chair Jerome Powell to “act as appropriate” to keep the U.S. economy healthy, although he stopped short of committing to rapid-fire rate cuts.

The markets clearly believe the Fed will have to act more aggressively and are fully priced for at least a quarter-point cut in September and more than 120 basis points of easing by the end of 2020.

The dollar rose 0.3% against the to 105.7 by 04:07 AM ET (08:07 GMT) after reaching an overnight low of 104.47, the weakest level since January.

The Turkish briefly tumbled to 6.47 overnight in what market watchers described as a “flash crash”, before pulling back to stand at 5.8160 against the dollar.

The against a basket of currencies was up 0.2% at 97.79 having bounced from 97.52.

The was down 0.24% to 1.1115, having climbed 0.6% on Friday, although restrained somewhat by speculation the European Central Bank will also have to ease aggressively next month.

The , a liquid proxy for risk, was a touch lower at 0.6747. An overnight low of 0.6689 was within a whisker of a recent decade-low of 0.6677.

The hit an overnight low of 0.6361, a level not seen since September 2015 and was last at 0.6366.

–Reuters contributed to this report

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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Yen surges, offshore yuan tumbles as trade war intensifies

By Stanley White

TOKYO (Reuters) – The yen surged on Monday as investors flocked to safe-haven assets after a sharp re-escalation in the U.S.-China trade war, which whacked investor confidence and darkened the global economic outlook.

The yuan also tumbled in offshore trade, weighed by expectations of a deeper slowdown in China as the world’s two-largest economies exchanged barbs over trade.

The Swiss franc and gold, two assets sought during times of heightened risk aversion, shot up in early Asian trade.

Financial markets could be in for a rough ride in the near future as investors are likely to shift money from stocks to less risky assets, such as debt, gold and safe-haven currencies.

“Speculators came into the market very early to put heavy pressure on dollar/yen,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“The fact that the is down this much shows speculators have gotten a little wild. The trade war is driving all these moves, and I don’t see this ending anytime soon.”

The yen surged to 104.46 per dollar, the highest since a flash crash this January, before paring gains to 104.70, up more than 0.5%.

The yen will next target 104.10 per dollar, which is the high it reached during a flash crash on Jan. 3 that roiled financial markets, Daiwa Securities’ Ishizuki said.

In the offshore market, the dollar rose 0.6% to 7.1850 yuan, the highest on record.

U.S. stocks tumbled on Friday when President Donald Trump announced an additional 5% duty on $ 550 billion in targeted Chinese goods, hours after Beijing unveiled retaliatory tariffs on $ 75 billion worth of U.S. products.

At the G7 meeting in France over the weekend, Trump caused some confusion by indicating he may have had second thoughts on the tariffs.

The White House on Sunday clarified these comments, saying Trump wished he had raised tariffs on Chinese goods even higher last week, even as he signaled he did not plan to follow through with demands that U.S. close Chinese operations.

The yen also surged around 1% versus the Australian () and New Zealand dollars ().

The dollar fell 0.2% to 0.9729 Swiss franc .

also rose 1.4% to $ 1,548.93 per ounce .

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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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

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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