U.S. Futures, Europe Stocks Steady as Asia Climbs: Markets Wrap

Andrew Cummings
May 21, 2019

The euro rose 0.15 per cent to US$1.1238.

Monetary authorities are adequately prepared to deal with short-term fluctuations of the yuan amid lingering trade friction between China and the United States, economists said on Tuesday. The trade-weighted index rose to 72.13 points from 72.03, again reflecting the change in the yuan's value.

The US Trade Representative's office also said it planned to hold a public hearing next month on the possibility of imposing duties of up to 25 per cent on a further $300 billion worth of imports from China.

In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

"It's lost 2 percent against the United States dollar so far this month and we're not even half way through the month", says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.

The market is seeking a reasonable level, and no greater decline in the offshore yuan is expected when the Hong Kong market opens Tuesday after the global markets responded Monday to the trade news over the weekend, said a forex trader at a foreign bank in Hong Kong.

China effectively runs two exchange rates, one inside China and the other outside it, often referred to as the renminbi.

Oil prices dipped in Asian trade on Wednesday following a surprising rise in U.S. crude stockpiles but remain propped up by tensions in the Middle East.

His comments came after China announced on Monday higher tariffs on $60 billion of US goods, effective June 1, in retaliation for Washington's decision last week to hike its own levies on $200 billion in Chinese imports. In new developments, Trump called on the Federal Reserve to "match" what he said China would do to offset economic hardship being caused by tariffs.

Elsewhere, oil fell as an industry report signaling a jump in USA stockpiles eased concerns over a supply crunch, after a drone attack in Saudi Arabia had highlighted the vulnerability of the country's energy infrastructure. In fact, both sides will pay.

Cavanaugh says that China is indirectly devaluating the yuan as a form of damage control to try to cushion the impact of the tariffs on its economy. "I am surprised that bonds are not rallying more".

The dollar was 0.15 percent lower at 109.790 yen, near a three-month low of 109.470 brushed late last week.

Upon further pressing from Wallace, Kudlow acknowledged that while China may suffer from the tariffs, it is in fact U.S. businesses and consumers that have to pay for them.

It was down 2.2 yen, or 1.2%, at 185.1 yen ($1.69) per kg as of 0033 GMT.

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