NYSE trader on fluctuating markets: 'Uncertainty is what we have'

Trump rants that China is guilty of 'currency manipulation' as stock markets around the world plunge

Trump rants that China is guilty of 'currency manipulation' as stock markets around the world plunge

But if the U.S. Federal Reserve carries on lowering interest rates and widening the gap between U.S. and Chinese interest rates, the yuan may climb back to the stronger side of 7 per dollar, according to Ji Tianhe, China head of foreign exchange and local markets strategy at BNP Paribas in Beijing.

China let the yuan slide past the key 7 per dollar level on Monday for the first time since the global financial crisis, days after the United States threatened to slap a 10% tariffs on $300 billion of Chinese goods.

The yuan was trading at 7.0435 in mid-afternoon, but that was stronger than the previous day's level.

While this was the weakest central bank fixing since April 21, 2008, it was firmer than market expectations and seen as a signal that authorities wanted to stabilise the decline in the currency following this week's sharp falls. If other countries see Chinese or US exporters gaining a currency advantage, they will feel pressure to respond by pushing their currencies lower, too. If other countries see Chinese or USA exporters gaining a currency advantage, they'll feel pressure to respond by pushing their currencies lower, too.

The yuan's moves over the past week are small compared with fluctuations of the euro and other major currencies.

China's central bank said on Tuesday that Washington's currency move would "severely damage worldwide financial order and cause chaos in financial markets", while preventing a global economic recovery.

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On Wednesday, the central bank lowered the starting point for trading again, setting it at 6.9996 to the dollar, nearly 0.5% below Tuesday's starting level. That would allow the currency to weaken to as much as 7.100 while staying within the 2% trading band.

The moves have jolted financial markets and fueled concerns about a global recession.

Stock market benchmarks in Tokyo and Shanghai closed down 0.3%. The central bank also said the yuan has strengthened 20 percent against the dollar over the past two decades.

The U.S. government has urged its allies not to use Huawei equipment, which it says China could exploit for spying. "They have a brawny tool at their disposal".

The U.S. Treasury last week put the designation on Beijing for the first time since 1994, roiling financial markets and escalating a bitter tit-for-tat tariff war between the world's two largest economies. That opens the way to possible new penalties on top of tariff hikes already imposed on Chinese goods in a fight over Beijing's trade surplus and technology policies. The next round of talks is scheduled for September in Washington. That would add to downward pressure on the exchange rate.

China's currency weakened slightly on Friday to 7.0501 per greenback, following a daily reference rate from the People's Bank of China that was in line with estimates. Citing that the risks of a havoc-scale currency market volatility seemed to be out of sight in a near-term outlook, a senior FX strategist at TD Securities in New York, Mazen Issa said, "Last night fixed over 7 and markets seem to be taking that fairly well, so perhaps some calm is installed in the market at least for the very near term". The reserves declined by a small margin of $15.5 billion in July to just over $3.1 trillion. "Then, if their exports keep on going, capital inflows will come and then the (yuan) should automatically appreciate", he said. "There are signs that this has already encouraged the PBOC to step-up intervention to manage the pace of depreciation".

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