Yuan firms on report China will speed up US farm purchases

HONG KONG: The yuan rose on Friday after a report that Beijing is prepared to accelerate its purchases of US agricultural products, easing fears that a trade war between the world's largest economies could flare up again.

The Chinese currency was steady in morning trade as Beijing's promise of additional economic stimulus offset fresh threats from US President Donald Trump to sever ties with China after officials from the two countries held their first high-level face-to-face meeting in months in Hawaii.

But the onshore yuan surged as much as 0.23pc in the afternoon after Bloomberg reported that Beijing will speed up purchases of US farm goods.

It ended the domestic session 0.15pc higher at 7.0780 per US dollar,but was flat for the week.

"This is different from the market's expectation previously, which was to the downside, factoring in no result whatsoever from the talks," said Ken Cheung, chief Asian FX strategist at Mizuho in Hong Kong.

However, with geopolitical tensions on the China-India border and the Korean peninsula still simmering, he said risk-off vibes may return in London and New York trading hours.

Into the third quarter, the yuan will gain from a softer dollar as safe haven demand will unlikely hit the pinnacle reached earlier this year even with more coronavirus infections, said Zhaopeng Xing, markets economist at ANZ in Shanghai.

The global dollar index fell 0.07pc to 97.375 in late afternoon Asia trade.

A Chinese medical expert said the spread of COVID-19 is under control in Beijing, which is having its worst outbreak since early February.

"Right now, the coronavirus pandemic's impact on the RMB is not that bad," said a trader in Shanghai, referring to the yuan's other name. He reckoned it will track dollar movements.

Prior to the open, the People's Bank of China set the midpoint guidance rate at 7.0913, close to the Reuters estimate of 7.0938.