HONG KONG: China's yuan was flat on Tuesday as investors remained cautious ahead of the next round of U.S.-China trade talks, and as the U.S. Justice Department pressed criminal charges on Monday against Huawei Technologies Co Ltd .
The U.S. charges against Huawei, for allegedly conspiring to violate U.S. sanctions on Iran, came as China officially challenged the United States on its tariffs on Chinese goods on Monday at the World Trade Organization.
Both events come ahead of key trade talks, including a meeting between U.S. President Donald Trump and Chinese Vice Premier Liu He, scheduled for Wednesday and Thursday in Washington.
"The main driver for renminbi appreciation so far this year has been the optimism around trade talks," and the lack of good news is placing pressure on the yuan, said a Shanghai-based banker at a foreign bank.
U.S. Treasury Secretary Steven Mnuchin also warned that currency issues will be on the agenda in the forthcoming talks, but traders dismissed possible surprises and pressure on the yuan.
"This is just the Americans' negotiation tactic," said a second trader in Shanghai at a Chinese bank.
Despite trepidation over negotiations, much of the bad news around Huawei and trade frictions was widely expected, said a third Shanghai-based trader at an Asian bank.
"Overall, we are still seeing a trend of appreciation," the trader said.
The spot yuan was changing hands at 6.7449 per dollar at midday, just 1 pip firmer than the previous late session close, after opening at 6.7480.
Prior to the open, the People's Bank of China set the yuan's daily midpoint rate at 6.7356 per dollar, firmer than the previous fix of 6.7472.
Tuesday's quiet trade followed a rally on Monday, which took the yuan to a more than six-month high against a lacklustre greenback.
More big moves are unlikely as China prepares for the Lunar New Year holiday, said traders. The public holiday for the week-long festival begins on Feb. 4. But investors should tread carefully, Philip Wee, Singapore-based FX strategist at DBS suggested in a Tuesday memo.
"The risk for the yuan to depreciate past 7 (per dollar) this year cannot be totally discounted," especially as the March 1 deadline of the trade truce draws near, he said.
Traders are also keeping an eye on a meeting by the U.S. Federal Reserve and a press conference by Fed chair Jerome Powell this week for clues on the dollar's direction.
The global dollar index fell to 95.739 from the previous close of 95.746.
The offshore yuan was trading 0.2 percent weaker than the onshore spot at 6.7587 per dollar.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.53, weaker than the previous day's 94.64.
Comments
Comments are closed.