Australian dollar, China’s yuan rise after Trump’s bullishness on trade

The yuan had suffered its steepest one-day decline since late July last year during the previous session, before hitting its lowest versus the greenback since late December early today. — Reuters pic
The yuan had suffered its steepest one-day decline since late July last year during the previous session, before hitting its lowest versus the greenback since late December early today. — Reuters pic

TOKYO, May 14 — China’s offshore yuan and the Australian dollar found their footing again today as broader sentiment stabilised after US President Donald Trump said he expected Sino-US trade negotiations to be successful.

Trump said earlier he would meet with Chinese President Xi Jinping at a G20 summit next month. China had announced yesterday it would impose higher tariffs on US$60 billion (RM250.2 billion) of US goods following Washington’s decision last week to hike its own levies on US$200 billion in Chinese imports.

Though analysts said it would take time for volatility to settle completely, risk-sensitive currencies including the offshore yuan and the Aussie held up well following comments from Trump late yesterday that trade talks with China are “going to be very successful”.

Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said the timing of Beijing’s announcement that it would impose higher tariffs on US goods had exacerbated moves in the foreign exchange market during the previous session.

“It seems the timing was probably a surprise so the moves in the currency market were rather large,” Yamamoto said, adding that market participants could also be over-reacting to Trump’s latest trade-related comments.

“Trump said he believes that (the trade talks) will be successful, but success for him isn’t necessarily a success for China,” Yamamoto said.

China’s offshore yuan last gained about a quarter of a per cent at 6.8948 per dollar.

The yuan had suffered its steepest one-day decline since late July last year during the previous session, before hitting its lowest versus the greenback since late December early today.

The Australian dollar managed to firm a tenth of a per cent to US$0.6952 after brushing its lowest since early January earlier in the session.

The Aussie is often seen as a proxy for Chinese growth because of Australia’s export-reliant economy and China being the country’s main destination for its commodities.

“Volatility in the market has risen quite a lot. I think it will take time before it will settle,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Ishizuki said he thought it was unlikely that sentiment would deteriorate significantly from here ahead of Trump’s planned meeting with Xi next month.

“Quite a lot of negative news has come out. But with things as they are, those have already been priced in by the market,” he added.

The dollar index against a basket of six rivals held steady at 97.320, having ended the previous session little changed.

Investor focus on Tuesday was also on euro zone industrial production for March and Germany’s ZEW economic sentiment index for May, both due around 0900 GMT.

The euro rose 0.15per cent to US$1.1238. Sterling was a shade higher at US$1.2968.

Against the safe-haven yen, the dollar gained a quarter of a per cent to 109.60, bouncing in line with the recovery in sentiment after falling as low as 109.15 yen in early trade.

The greenback had touched a more than three-month low of 109.02 yen brushed during the previous session when it shed nearly 0.6per cent.

Bitcoin, the world’s best-known cryptocurrency, on Monday hit US$8,000 on the Bitstamp exchange for the first time since July last year, before retreating slightly.

It was last up 1.9per cent on the day at US$7,965.98. — Reuters

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