Saturday, 17 November, 2018

China markets swing wildly on growth, trade uncertainty

A local investor looks at the electronic Stock markets across Asia are suffering
Nellie Chapman | 06 July, 2018, 05:13

China's central bank moved to calm jittery financial markets yesterday after the yuan fell through the psychologically significant 6.7 to the United States dollar mark, hitting its lowest in nearly a year as anxieties over U.S. trade frictions deepened.

Some reports cited traders as saying that big Chinese state-owned banks, which sometimes act on behalf of the central bank, were buying the yuan.

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 USA products.

Bonds started July on a stronger note, with the yield on 10-year government debt falling 1 basis point to 3.47 per cent, its lowest level since April 2017.

"Notwithstanding the trade war concerns, the broader picture is the USA central bank still remains the most hawkish central bank among its peers and that should support the dollar for now", said Jane Foley, senior currency strategist at Rabobank.

After being one of the outperforming currencies for most of the year, the yuan has become one of the worst performing currencies in the Asian markets.

Hao Hong, chief strategist at Hong Kong broker BOCOM International, said it's too early to call the bottom.

The yuan extended losses and has fallen around eight percent since the end of March - it is now at an 11-month low - adding to fears about the mainland as leaders struggle to cap a debt mountain while also supporting growth.

The dollar was down 0.2 percent to the yen at 111.35 while the euro traded up 0.1 percent at $1.1665 against the euro.

Ahead of the U.S. Independence Day holiday on Wednesday, the dollar was down 0.14 percent against a basket of six major currencies at 94.440, after notching up three consecutive months of gains.

Traders said statements from the PBOC officials went some way towards calming the market.

The central bank has closely watched recent fluctuations, Yi said, adding that China's economic fundamentals were sound and financial risks were largely under control.

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.

That helped MSCI's world index to rise 0.25 percent, inching further off 2-1/2 month lows hit last week. -China trade tensions may pose a risk.

Asian shares dropped in tentative morning trade on Tuesday as sentiment remained fragile in the face of tense trade relations between the United States and major economies, with investors braced for another potentially rocky day for Chinese markets.

Support: 6.6263 (session high), 6.6046 (previous day's low), 6.60 (psychological support).

USA crude oil futures settled 0.3 percent higher at $74.14 a barrel after rising above the $75 mark for the first time in 3-1/2 years.