Friday, 17 August, 2018

Dollar on defensive against yen, euro after Trump comments

Trump flags and hats made in China are reportedly being held up at customs as trade war heats up US dollar down on as Trump makes fresh threats vs China
Jodi Jackson | 23 July, 2018, 15:28

WALL STREET: U.S. indexes finished mostly lower.

AUTO TARIFFS REJECTED: The U.S. Commerce Department sought feedback on President Donald Trump's plans to consider taxing auto imports on Thursday.

Companies including Microsoft and Honeywell rose as investors were pleased with their quarterly reports, but General Electric stumbled.

The trade dispute has complicated efforts by the People's Bank of China to make the exchange rate system more flexible, market-oriented and efficient.

The pan-European FTSEurofirst 300 index lost 0.13 percent, amid rising trade tensions.

Friday's losses came a day after Trump had also said he was concerned that the "Chinese currency was dropping like a rock", he did not like rising USA interest rates and that the strong USA dollar "puts us at a disadvantage".

"So fundamentally speaking, we do think CNY is like many other exchange rates in the world, it can go up and down depending on the macro outlook and things like that". "This is one more item that just creates noise in markets".

The euro remained largely unchanged however, and was up 0.2 percent on the day at $1.1658. The Dow Jones Industrial Average lost 6.38 points to 25,058.12.

Italian 10-year yields increased eight basis points to 2.59 percent.

Long-term bond prices dropped.

The British pound strengthened 0.9 percent to $1.3136.

On Friday morning, the yuan fell to 6.7943 CNY for one United States dollar, down 0.28% from the previous day, and then slightly recovered to close to 6.78 CNY at the end of the day, generating rumors that the central bank to intervene in the foreign exchange market.

West Texas Intermediate crude rose for a fifth day, climbing 1 percent to $70.46 a barrel. The stock climbed 1.8 percent to $106.27. GE, which has been selling and splitting off businesses, also cut its forecast for how much cash its businesses will generate.

The Department in its last report in April refrained from branding China with the label, but stepped up criticism of the Asian nation's lack of progress in rectifying its trade imbalance with the U.S.

China is Nigeria's biggest trading partner after the USA, with volumes between the two totaling $9.2 billion in 2017, according to data compiled by Bloomberg.

With China showing little signs of arresting its currency's depreciation, the yuan promptly retreated to a near 13-month low. If the yuan continues to depreciate, goods exported to China will become more expensive to consumers there and Chinese exports would also be relatively cheaper.

China's shock devaluation of the yuan in 2015 provides a good template for what the contagion might look like, according to Robin Brooks, the chief economist at the Institute of International Finance and the former head currency strategist at Goldman Sachs Group Inc.

Oil posted its third consecutive weekly loss amid concern the escalating trade rows will undercut energy demand, undermining reassurances from Saudi Arabia that it won't flood global crude markets.

Wholesale gasoline rose 1.2 percent to $2.07 a gallon.

Gold increased for the first time in six trading sessions, climbing 0.6 percent to $1,230.21 an ounce. The Shanghai Composite Index edged 0.1 percent lower to 2,769.06. South Korea's Kospi added 0.3 percent and Hong Kong's Hang Seng gained 0.8 percent.

Annabelle Liang contributed from Singapore.

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