Offshore Chinese yuan pares back gains as enthusiasm from tariffs delay wanes

Wednesday,   14-Aug-2019   03:57 PM (IST)

The offshore Chinese yuan offloaded on Wednesday the gains it made the day before on the back of the announcement that the United States will delay the recently announced tariffs on Chinese imports until later this year. The fall in the yuan mirrored analysts’ views that the delay in tariffs, although a positive step, wasn’t even close to resolving the US-China trade war. A strengthening of the Japanese yen on Wednesday also reinforced these views and showed that risk appetite hasn’t fully made a comeback to the financial markets. Weaker-than-expected Chinese economic data contributed to yuan falls. China’s closely watched industrial output rose in July at the slowest pace in more than 17 years. The offshore yuan jumped to a one-week high against the dollar on Tuesday after U.S. President Donald Trump backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods. The announcement was made following renewed trade discussions between U.S. and Chinese officials. On Wednesday, however, the yuan was down by 0.4% versus the greenback at 7.0360, staying below the psychological level it breached last week when the 10% tariffs were announced. Elsewhere in the foreign exchange market, major currencies were little changed Wednesday morning. The euro was flat at $1.1180 despite weaker second-quarter German gross domestic product data as the quarter-on-quarter contraction was largely expected. Moreover, the year-on-year figure was higher than economists polled by Reuters predicted. Traders are waiting for the first estimate of eurozone GDP data, due at 0900 GMT. Sterling was also steady, last flat at $1.2056, and little changed against the euro at 92.73 pence. However, current levels suggest investors aren't willing to take the pound away from the multi-year lows it reached last week. Traders are also awaiting inflation data in the UK at 0830 GMT, which is expected to decline slightly in July to 1.9% year-on-year from the 2% seen in June.