China central banker says currency slide under observation

Andrew Cummings
July 6, 2018

The central bank earlier set the midpoint at 6.6497 yuan per dollar, its weakest fixing in about 10 months.

Chinese currency and equity markets have been on edge ahead of Friday, when U.S. tariffs on US$34 billion (S$46.5 billion) worth of Chinese goods kick in.

In a move that may further inflame trade tensions, President Donald Trump's administration has recommended blocking China Mobile from offering telecommunications services from within the US citing security concerns. It's lost about 4.6 percent of its value against the dollar since June 14.

In a statement posted on the website of the People's Bank of China, Governor Yi Gang said the central bank was closely watching fluctuations in the foreign exchange market and would seek to keep the yuan at a stable and reasonable level. Cross-border capital flows were under control, he noted.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 2, 2018.

Some reports cited traders as saying that big Chinese state-owned banks, which sometimes act on behalf of the central bank, were buying the yuan.

World stocks rose on Tuesday, supported by broad gains in Europe and rising oil prices, even though markets across Asia remained in the grip of trade turbulence.

The Chinese yuan, on a downward spiral since mid-June, slipped past 6.7 per dollar in early trading on Tuesday for the first time since August 9, 2017 before paring losses on talk of intervention by the Chinese central bank.

USA benchmarks initially gave up some gains in mid-afternoon trading after minutes from the Federal Reserve's last meeting on June 12-13 showed central bankers discussed whether trade tensions could dent the US economy.

The currency traded overseas gained almost 0.4%.

Elsewhere the Australian dollar took heart from solid domestic retail sales data and edged up to $0.7403, moving away from an 18-month trough around $0.7311. US crude fell 1.5 percent to $73.03 per barrel and Brent was last at $77.71, down 0.68 percent. China's purchasing manager index readings for June released on Saturday showed a gauge of export orders shrinking, suggesting the trade war is already weighing on growth.

Asian shares dropped in tentative morning trade on Tuesday as sentiment remained fragile in the face of tense trade relations between the United States and major economies, with investors braced for another potentially rocky day for Chinese markets.

US crude oil futures settled 0.3 percent higher at $74.14 a barrel after rising above the $75 mark for the first time in 3-1/2 years. Beijing has promised to retaliate with tariffs on United States products.

"We think there is space for a rally of Mexican peso in the transition period, as local retail investors that have been overweight cash and USA dollar should start shifting back to peso given the opportunity cost in yield".

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