Yuan to Weaken Further as US-China Trade War Deepens
Chinese: According to the Reuters poll of strategists, China will maintain a tight grip on the yuan, allowing it to weaken further against the U.S Dollar. They are fighting the ongoing trade war with the US and a slowing domestic economy.
The People’s Bank of China (PBOC) set its yuan rate at 11.5 – year low against the dollar. China was responding to the U.S tariffs on $30 billion of Chinese imports affected last week. Read more about China’s Yuan.
According to the latest Reuters poll of Aug 29-Sept, approximately 60 strategists predicted that the Chinese currency would trade around 7.19 against the dollar in 6 months. It’s over 0.5% weaker than Wednesday’s 7.15, before readjusting to 7.16 in a year. Analysts have lowered their outlook on the yuan now, three months in a row. Read more about Chinese currency
Nearly 70% of analysts who responded to an additional question were of the view that China would depreciate the yuan further to fight the U.S trade war.
A weaker Chinese currency is favorable for the world’s largest exporter of manufactured goods; however, it’s unlikely to cushion the blow from import taxes US imposes. Read more about China’s Yuan.
“Weakening the Chinese currency can’t benefit exporters if the tariffs are so high that they lose the orders altogether,” noted Tim Condon at ING in Singapore. Read more about Chinese currency
People’s Bank of China restructured it its key interest rates last month to counter the economic slump. Part of its broader market reforms, the bank established the main loan rate as its main policy rate and lowering its real interest rates for companies.
Other respondents who answered a separate question said China’s decision to change its interest rate system did not allow the Chinese currency to trade more freely.
Safe haven yen slides; Risk sensitive currencies gain on hopes for trade talks
News that China-US trade talks could resume next month caused the safe-haven yen to drop on Thursday. Conversely, the risk-sensitive New Zealand and Australian dollars traded higher.
China’s Ministry of Commerce said its trade team would consult with their U.S colleagues in Mid- September as they prepare for negotiations in October. Both sides agreed to take actions in creating favorable trade conditions.
The USD was 0.1% higher against the yen at 106.51 by 03:42 AM ET.
The AUD touched a one-month high of 0.6825 from 0.6817. The New Zealand dollar smashed a one-week high of 0.6383.
The euro was higher at 1.1040. However, data showing that German industrial orders fell more than expected in July on weak overseas demand weighed it down. It could cause the euro area’s largest economy to slip into a recession in the third quarter.
The USD index edged down to a one-week low at 98.32.
The GBP was at 1.2241, after its best day against the USD in more than five months.
British government abandoned attempts to block legislation aimed at stopping Brexit without a deal on Oct. 31.
The move paved the way for the British PM to ask the EU for a three-month extension to the Brexit deadline. That is if he fails to reach a renegotiated transition deal with the bloc by the middle of October.
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. Subscribe now and receive FREE updates on the market today!