China pushes back against yuan slide, pledges stability

A local investor looks at the electronic

A local investor looks at the electronic

Punishing U.S. tariffs on some Chinese imports are due to take effect Friday, with China planning tariffs on an equal amount of U.S. exports. Japan's Nikkei average also recovered from a 0.9 percent fall and was last off 0.1 percent to a near three-month closing low.

Also muddying trade relations between the world's two largest economies was a Chinese court ruling that temporarily barred USA chipmaker Micron Technology Inc from selling some of its main products in the world's biggest memory chip market.

"It's not clear yet if the trade row will derail the global economy as a whole but it's already clear that it will harm Chinese companies at least", said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

"There have been some fluctuations in the foreign exchange market recently", People's Bank of China Governor Yi Wang said in a statement.

The dollar was down 0.1 percent versus the yen at 110.465 while the euro traded up 0.1 percent at $1.1664. The onshore yuan weakened past 6.7 per dollar in early trading on Tuesday for the first time since August 9, 2017. At 0542 GMT it was trading at 6.7010.

Hong Kong's markets were closed on Monday for a public holiday to mark the 21st anniversary of the former British colony's return to Chinese rule.

Analysts generally reject suggestions that China could use the weaker yuan as a weapon in the trade clash.


Short-covering rallies should not be confused with trend reversals, and provided traders continue to view escalating trade tensions will reduce the U.S. trade deficit, thereby benefiting the dollar, gold will continue to remain out of favour. "After all, nothing has been resolved on the Sino-US trade disputes".

Dealers brushed off a late rally on Wall Street to continue a selling frenzy that has hammered equities across the globe, while high-yielding currencies are also under pressure against the dollar.

Other Asian currencies weakened, especially those such as the Indonesian rupiah that are doubly exposed - to trade and oil prices approaching $80 a barrel.

It is highly unlikely that China is using yuan depreciation as a tool in trade negotiations with the United States, said Tai Hui, chief market strategist of J.P. Morgan Asset Management (Asia Pacific). Its "base case" is for the currency to end the year at 6.6.

The outlook for Sino-U.S. trade relations was further clouded on Tuesday by Washington's moves to block China Mobile from offering services in the U.S. and news that growth in China's exports to the United States has slowed significantly this year. Europe's tech and energy sectors rose 0.5 and 1 percent respectively.

On commodity markets, copper edged higher on Tuesday but was still near a seven-month low reached in the previous session as the trade tensions raised concerns about demand.

Must stick to managed floating exchange rate system.

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