Published: Thu, July 05, 2018
Business | By Eloise Houston

China cenbank blames yuan moves on dollar rise, external uncertainty

China cenbank blames yuan moves on dollar rise, external uncertainty

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.

Yi's remarks come at a time when the Chinese currency is under considerable pressure: The onshore yuan weakened past 6.7 per dollar in early trading on Tuesday for the first time since Aug 9, 2017.

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

While the focus this week is mainly on the hundreds of billions worth of goods targeted by China-US tariffs, Trump has also taken aim at the European Union and Canada, which have both announced retaliatory measures, adding to global trade war warnings.

Chinese stocks slipped on Monday, handing back some hard-won gains from a bounce late last week as worries mount ahead of a US move to impose $34 billion of tariffs on Chinese exports, Reuters reports.

"Stock market plunge is irrational overreaction", read a headline on the front page of state-run newspaper Securities Daily on Tuesday.

The yuan was last traded at 6.6960 per dollar.

Officials may intervene if the yuan, measured against its trading partners' currencies, drops more than 0.6 percent to 0.7 percent in one session, Morgan Stanley said.

The Chinese central bank set the Yuan reference rate at 6.6157 on Monday (vs Friday's fix of 6.616), snapping eight straight days of the lower fix. He said that the bank is closely watching the foreign exchange market's recent fluctuations due to a strengthening dollar and external uncertainties.

The central bank was not immediately available to respond to Reuters' request for comment on the yuan's moves.

Thankfully for regional risk, the PBoC engaged the yuan airbrake yesterday afternoon, and at least for the time being, with the help of Chinese state-owned banks that were seen selling dollars to prop up the Chinese currency, is restoring a sense of calm in regional markets.

Meanwhile, PBOC Deputy Governor Pan Gongsheng said at a conference in Hong Kong that policy makers are "confident" that the yuan can be kept basically steady, Bloomberg reported.

"We think the latest developments go in line with our view that Lopez Obrador will be more pragmatic than some domestic market participants expect", said Tania Escobedo, New York-based Latam FX Strategist at RBC Capital Markets, adding there was space "for a rally" in the peso.

"Investors don't care and spot yuan rates continued weakening", a trader said.

That helped MSCI's world index to rise 0.2 percent, inching further off recent 2-1/2 month lows.

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. At 0543 GMT the Shanghai Composite was down just 0.05 percent while the CSI300 was off 0.33 percent.

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