China has already been welcoming record inflows into its local-currency debt after making it easier for foreign investors to access domestic securities and winning inclusion in a key global bond index.
SHANGHAI: China’s yuan slipped to a near one-week low against the stronger U.S. dollar on Thursday, snapping a five-day winning streak, while Washington and Beijing delivered on their threats to impose new tariffs.
The United States and China, escalating their trade war, on Thursday implemented 25 percent tariffs on $16 billion worth of each other’s goods.
The latest round brings to $50 billion the value of imports subjected to tariffs on either side since early July, and more are in the pipeline, adding to risks for global economic growth.
Spot yuan did not move when the tariffs were imposed at midday China time, but it moved lower earlier on Thursday to reflect a rebound in the greenback in overseas markets, yuan traders said.
Lu Zhengwei, chief economist at Industrial Bank in Shanghai, said the latest tariffs were unlikely to make the Chinese currency volatile in the short term.
“The market has priced in the impact from this batch of tariffs,” he said.
Lu added that it should take about six months before the tariffs had an impact on economic fundamentals.
Prior to Thursday’s market opening, the People’s Bank of China set the yuan’s midpoint rate at 6.8367 per dollar, largely matching forecasts, and 96 pips weaker than the previous fix of 6.8271.
In the spot market, the onshore yuan opened at 6.8568 per dollar and weakened to 6.8741 at one point, the lowest level since Aug.17.
As of midday, the spot yuan was changing hands at 6.8728 at midday, 340 pips weaker than the previous late session close and 0.53 percent softer than the midpoint.
Traders said they did not expect any agreement to be reached during trade talks between U.S. and Chinese officials in Washington - the first one in more than two months.
In global markets, the dollar rose against a basket of currencies after minutes of the Federal Reserve’s latest meeting suggested the U.S. central bank is on course to further raise interest rates.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.12, weaker than the previous day’s 93.34.
The global dollar index rose to 95.417 from the previous close of 95.146.
The offshore yuan was trading 0.01 percent weaker than the onshore spot at 6.8734 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.9218, 1.23 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate. - Reuters
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