China stocks, currency weaker on trade war escalation, state buying seen

Marco Green
May 21, 2019

The Australian dollar shed 0.3 percent to $0.6976.

China's yuan was set for its worst daily fall in nine months on Monday as trade negotiations between the US and China ended after US President Donald Trump raised tariffs on Chinese goods. The trade-weighted index rose to 72.13 points from 72.03, again reflecting the change in the yuan's value. The White House is preparing duties on the remaining $300 billion of Chinese imports, and economists warn the new penalties will eventually weigh heavily on the American economy.

The central parity rate of the Chinese yuan weakened 42 basis points to 6.7954 against the dollar Monday, the lowest since January 24, according to the China Foreign Exchange Trade System.

"It's lost 2 percent against the United States dollar so far this month and we're not even half way through the month", says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.

Stocks Mixed as Trade Angst Lingers; Yuan Steadies: Markets Wrap More (Bloomberg) - Asian stocks were mixed Wednesday as a rebound in US equities failed to lift sentiment that remains fragile after the trade war escalated.

His comments came after China announced on Monday higher tariffs on $60 billion of USA goods, in retaliation of Washington's decision last week to hike its own levies on $200 billion in Chinese imports.

Fox anchor Chris Wallace said to Kudlow: "It's not China that pays tariffs".

Oil futures fell on Monday with Wall Street, as the negative turn in the U.S. "Both sides will pay in these things".

"The implementation of the new tariffs are (almost) three weeks away from now, and the talks have not collapsed", Steven Leung, sales director at UOB Kay Hian in Hong Kong, said of the quick recovery in A-shares. "I am surprised that bonds are not rallying more". At that time, the market will likely re-price the chance and direction of the Fed's future rate adjustment, according to the latest research report from Scotiabank.

The long-term 10 year Treasuries yield slightly increased by one basis points after falling by seven basis points on Monday and was at 2.41%.

The greenback remained within striking distance of a more than three-month low of 109.02 yen brushed during the previous session, when it shed almost 0.6 per cent.

The US told China it has a month to secure a trade deal or face tariffs on all its exports, ratcheting up pressure after it accused President Xi Jinping's government of backpedaling on promises.

Other reports by Click Lancashire

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