Published: Fri, July 06, 2018
Markets | By Otis Pena

China’s yuan sharply rises against dollar but stock markets unconvinced

China’s yuan sharply rises against dollar but stock markets unconvinced

On equity markets, Hong Kong dived as much as 3.3 percent at one point to nine-month lows, hit also by a USA move to block China Mobile from offering services to the US market. Beijing has promised to retaliate with tariffs on U.S. products.

The Shanghai Composite Index sank 2.5 per cent, more than wiping out a 2.2 per cent rally on Friday, and extending last month's 8 per cent rout.

But a July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on US products.

Major currencies marked time on Wednesday and the Chinese yuan recovered from 11-month lows after authorities took steps on Tuesday to calm financial markets rattled by trade war worries, report Agencies.

"We don't expect policymakers to encourage material RMB depreciation", China economists at the bank, led by Robin Xing in Hong Kong, wrote in a July 1 note, referring to the renminbi, the official name of China's currency.

At 0341 GMT, it was trading at 6.6305 yuan per dollar, 0.2 per cent stronger than the late night close on Tuesday.

Currently, the currency pair is trading at 6.6330 - up 0.24 percent on the day, but well below the high of 6.6390 seen on Friday.

The yuan on Tuesday hit its lowest level versus the dollar in almost a year.

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.

Honor 10 GT with 8GB of RAM launched in China
The 6 GB variant now goes for CNY2,599 (less than $390/€340), so the more powerful one should be slightly higher than that. There's 128GB of internal storage with 24-megapixel + 16-megapixel dual camera unit, aligned horizontally at the back.

Analysts generally reject suggestions that China could use the weaker yuan as a weapon in the trade clash. Europe's tech and energy sectors rose 0.5 and 1 percent respectively.

Elsewhere in currency markets, the euro, which had been pressured by political uncertainty in Germany, pared losses after Chancellor Angela Merkel's conservatives settled a row over migration that threatened to topple her governing coalition after interior minister Horst Seehofer dropped his threat to quit.

The dollar last stood at 110.97 yen, giving up gains following sharp falls in Chinese shares.

The Reserve Bank of Australia (RBA) kept rates at record lows of 1.5 percent, as widely expected, at its monthly policy meeting on Tuesday and showed no hint of hiking anytime soon.

"The big driver behind USA resilience is that tech has been strong", said Rory McPherson, head of investment strategy at asset manager Psigma.

Other emerging market currencies have also fallen against the strengthening dollar.

All this should set the stage for Asia markets to open lower, as investors continue to ponder the negative regional impact of trade tension and growing concerns about global growth prospects. It has weakened by 2.4 percent against the dollar since the beginning of this year.

Energy stocks have been boosted by Brent crude's rise past $78 a barrel, McPherson noted.

Like this: