Dollar falls versus yen, offshore yuan slips on trade woes
Aug 10 2019
Analysts had expected a 2.0% drop after June's 1.3% fall.
White House officials say they still expect Chinese negotiators to come to Washington in September for talks, and that the latest tariffs could still be averted if the world's two largest economies make progress on a trade agreement.
A second Shanghai-based trader said trade talks that were scheduled for September in Washington, prior to the latest US tariff threat, now seem unlikely, adding further pressure on the Chinese currency.
Even after so many attempts the trade war between China and the United States doesn't seem to be cooling down. With traders, economists, and central bankers alike now keenly focused on it, the People's Bank of China's daily fix - or where it pegs the yuan versus the dollar - has become the market equivalent of appointment viewing.
The yield gap between Chinese and US benchmark 10-year government bonds stood at 134 basis points on Friday afternoon, compared with a low of 28 basis points hit in November.
China's exporters and their US customers have been whipsawed in recent months by trade uncertainties, with the fallout rippling through global suppliers from Germany to Singapore.
"This hopefully can offset some of the downside risks from the US-China bilateral trade", Wang said.
China's trade surplus with the United States stood at $27.97 billion in July, narrowing from June's $29.92 billion. But the figure for the first seven months of this year was up by around 4 percent, indicating a continuing imbalance.
The central bank on Thursday set the starting point for the yuan's daily trading at 7.0039 to the USA dollar - the first time since 2008 that the level was set below the politically sensitive level of seven to the dollar.
However, imports remained weak, declining 5.6 percent and highlighting sluggish domestic demand as China's economy struggles to get back on firmer footing.
"Looking ahead, exports still look set to remain subdued in the coming quarters as any prop from a weaker renminbi should be overshadowed by further USA tariffs and broader external weakness", Julian Evans-Pritchard, senior China Economist at Capital Economics, said in a note yesterday.
This week's moves signaled the PBOC is comfortable with currency weakness while also demonstrating that China isn't prepared to let the yuan go into the kind of downward spiral that in 2015 spurred capital outflows. This article is strictly for informational purposes only.