China Is Weakening Its Currency Before U.S. Trade Talks Begin
(Bloomberg) — China weakened its daily currency fixing by more than traders and analysts had expected before high-ranking U.S. officials arrive in the country to discuss trade issues.
The People’s Bank of China cut the reference level to 6.3670 per dollar, weaker than the average estimate of 6.3610 in Bloomberg survey of 21 traders and analysts. The deviation is the biggest since Feb. 7 and continues a pattern set in April when the fixing was weaker than expected on all but one day, according to Bloomberg calculations.
“The move in the fixing today is aggressive,” said Ken Cheung, a currency strategist at Mizuho Bank Ltd. in Hong Kong. “China may want to weaken the yuan pre-emptively before the trade talks with the U.S., so that they have room to strengthen the currency” if needed, Cheung said, adding that policy makers may also be keen to arrest the yuan’s advance against a basket of peers.
U.S. Treasury Secretary Steven Mnuchin, White House advisers Larry Kudlow and Peter Navarro, and Commerce Secretary Wilbur Ross will be in Beijing in a bid to narrow the U.S. trade deficit.
The yuan fell 0.4 percent to 6.3565 per dollar at 10:23 a.m. in Beijing, and lost 0.3 percent in Hong Kong.
“China might be concerned that potential worsening of trade conflicts with the U.S. will likely hurt exports, and it might be sending a signal that the currency can be weakened further if tension escalates,” said Qi Gao, a Singapore-based strategist at Scotiabank. “The PBOC won’t allow rapid declines, as such moves could trigger large capital outflows and are hard to contain.”
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Latest posts by investing.com (see all)
- Forex – Sterling Rebounds on "Diminished" Brexit Risk; Dollar Flat - January 16, 2019
- Theresa May Survives Vote of No Confidence; Pound Flat - January 16, 2019
- All clear or keep clear? Turkey's lira still vulnerable - January 16, 2019