Yen up as markets dismiss Trump's trade concession, China data disappoints

Reuters TOKYO | Updated on August 14, 2019 Published on August 14, 2019

The yen rose on Wednesday as weaker-than-expected Chinese economic data reinforced the view that resolving the trade war was a long way off even if US President Donald Trump had delayed some additional tariffs.

The offshore yuan remained lower against the dollar after China's closely watched industrial output rose in July at the slowest pace in more than 17 years. The onshore yuan rose against the dollar, taking its cue from a stronger fixing.

News the United States would delay some tariffs supported Asian stocks, but optimism in the currency market quickly faded on broader concerns there are no quick solutions to the trade row, which economists say is dragging on China's economy and threatening global growth.

Increasingly violent clashes between protesters and police in Hong Kong, worries about Britain's exit from the European Union, and West Asian tensions mean risk aversion could quickly flare up again and roil major currencies.

“If we think only about the United States and China, there could be more room for dollar gains and yen losses, but this does not mean trade frictions have been resolved,” said Tohru Sasaki, head of Japan markets research at JP Morgan Securities in Tokyo. “There are still a lot of geopolitical risks, such as Hong Kong, Brexit, and the Iranian situation. I don't expect significant (risk-on) moves.”

The dollar fell 0.41 per cent to 106.31 yen in Asia. The Australian dollar slipped 0.6 per cent to 72.10 yen, while the New Zealand dollar fell 0.5 per cent to 71.77 yen.

Against the offshore yuan, the dollar rose 0.5 per cent to 7.0405 yuan. However, in the onshore market, the yuan opened at 7.0240 per dollar, stronger than its previous close at 7.0558.

On Tuesday, US President Donald Trump backed off of his September 1 deadline for 10 per cent tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, in the hopes of blunting their impact on US holiday sales.

Still, trade negotiations between the United States and China have progressed in fits and starts, so many investors and analysts have scaled back expectations for a resolution in the near term.

China's industrial output rose 4.8 per cent in July from a year earlier, which was below the median estimate for a 5.8 per cent year-on-year increase and marked the slowest growth since February 2002, data showed on Wednesday.

Retail sales and fixed-asset investment in July also grew less than forecast, highlighting concerns the trade war is damaging the health of the world's second-largest economy.

The dollar index, measuring the greenback against a basket of six currencies, was little changed at 97.755 after jumping 0.4 per cent on Tuesday.

Hong Kong's airport resumed operations on Wednesday, rescheduling hundreds of flights that had been disrupted this week as protesters clashed with riot police in a deepening crisis in the Chinese-controlled city.

Ten weeks of increasingly violent clashes between police and pro-democracy protesters, angered by a perceived erosion of freedoms, have plunged the Asian financial hub into its worst crisis since it came under Chinese rule from Britain in 1997.

The euro was unchanged at $1.1152, but fell 0.43 per cent to 118.76 yen. European data on consumer prices and GDP is due from Europe later on Wednesday and could shape the near-term direction of the common currency.

Sterling was little changed at $1.2065, but remained within striking distance of $1.2015, the lowest level since January 2017. Britain will release consumer price data later on Wednesday, but uncertainty about how Britain will exit the European Union has clouded the outlook for the Bank of England's monetary policy.

Published on August 14, 2019
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