China denies U.S. allegation of currency manipulation

Marcus Newton
July 25, 2018

Trump's remarks on Friday, coupled with new threats to slap duties on all US imports from China, triggered sell-offs in Wall Street and European stocks on Friday, despite good corporate earnings.

Chinese Premier Li Keqiang stressed the government would accelerate plans to reduce taxes by more than 1.1 trillion yuan ($160 billion) and to issue 1.35 trillion yuan in local government special bonds for infrastructure.

While it does let market forces play a role, China keeps the yuan within a narrow trading band that its adjusts daily and is widely known to intervene, which has triggered past USA allegations of manipulation, including from Trump.

Although the European Central Bank is on course to end its asset-purchase program this year, it has indicated record low rates should remain at least until mid-2019. The Bloomberg Dollar Spot Index slid as much as 0.74pc, its biggest intraday decline since March, before paring its loss to around 0.6pc.

The U.S. dollar fell the most in three weeks against a basket of six major currencies, halting a rally that had driven the greenback to a year high. Fundamental analyses tend to be overrated, but I think the relative strength of the U.S. economy and the Federal Reserve's monetary policy have helped to drive a strong bullish trend in the U.S. Dollar over recent months.

The Chinese currency fell sharply, reaching its lowest value in the past year, which is great relief from exporters, but risking to raise Donald Trump's anger within the trade war.

More news: Trump's ex-lawyer Cohen and Rev. Al Sharpton meet 'n tweet
More news: Trump & Putin Helsinki Summit with Russian Expert William Taubman | Connecting Point
More news: Tiger Woods' run at The Open proves he can win another major

In early trade Tuesday, the yield on 10-year Chinese government bonds jumped 5 basis points to 3.57 percent.

"While oil prices were the primary beneficiary of the weekend's headline battle between President Trump and Iranian President Rouhani, that boost started to fizzle as traders then veered to oversupply concerns", said Stephen Innes, head of Asia-Pacific trading at Oanda trading group.

Shrugging off the weaker yuan, China's stock markets rose as investors cheered the prospect of policy easing and picked up bargains.

Trump, on Friday, lamented the recent strength of the USA dollar and accused the European Union and China of manipulating their currencies. The Shanghai Composite index .SSEC and the blue-chip CSI300 index .CSI300 both closed up 1.6 percent.

The offshore yuan fell almost 0.6 percent to a low of 6.8448 per dollar, its weakest level since June 2017. The U.S. economy likely grew at a 4.2 percent annual rate last quarter, the fastest since 2014, according to a Bloomberg survey.

The People's Bank of China (PBOC) set the midpoint rate at 6.7891 per dollar ahead of the market open, its weakest since July 11, 2017.

Other reports by MaliBehiribAe

Discuss This Article