Published: Fri, August 09, 2019
Finance | By Loren Pratt

China lowers yuan's trading range but currency stabilizes

China lowers yuan's trading range but currency stabilizes

Tensions escalated after Washington branded Beijing a currency manipulator and threatened to impose 10 per cent tariffs on $300 billion in Chinese imports, starting on September 1.

Chinese exports climbed 3.3% from a year earlier to $221.5 billion last month, up from a 1.3% contraction in June. That was stronger than analysts had expected, and offered more reassurance for investors that China was not kicking off an all-out currency war.

But imports remained weak, declining 5.6 percent and highlighting still sluggish domestic demand. Still, the drop was less than an expected 8.3 percent and June's 7.3 percent.

Earlier in the week, financial markets tumbled as Beijing allowed the yuan to plummet to an 11-year low against the dollar.

China bought small amounts of US soybeans, wheat, sorghum and pork last week ahead of the latest escalation of trade tensions with Washington, according to USA government data issued on Thursday, in what may be the last American farm commodity sales to China for the foreseeable future.

"It could suggest that some exporters are trying to diversify their export regions, it could also be due to manufacturers' relocations to ASEAN [from China]", Australia and New Zealand Banking Group Ltd senior China economist Betty Wang (王蕊) said.

The RMB exchange rate will stay generally stable and at an adaptive and balanced level as the market has fully responded to the impact of recent US escalating trade frictions, Wang added.

Can China maintain the trade momentum?


The USDA report confirmed that export shipments of US agricultural goods have continued despite the rising tensions.

An official Chinese think tank attributed the rise in exports partly to Beijing's Belt and Road initiative, a program that aims to boost business and trade ties with dozens of countries across the world. Visit MarketWatch.com for more information on this news.

The United States raised tariffs on a large number of Chinese goods in May, after trade negotiations broke down, and Beijing retaliated.

That has been a major complaint of President Donald Trump.

That left China with a trade surplus of US$45.06 billion last month, compared with a US$50.98 billion surplus in June.

China's foreign trade rose steadily by 4.2 percent year on year to 17.41 trillion yuan (US$2.47 trillion) in the first seven months with rapid growth in the private sector.

Officials have this week pledged stability after abandoning the key support level, allowing the yuan to weaken past 7 for the first time since 2008.

While China has stepped in to stabilize the yuan in recent sessions, markets remain on edge in case of further weakness. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. This article is strictly for informational purposes only.

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