Yuan Little Changed After PBOC Announces Supportive Measures

On Monday, The Chinese yuan was little changed  as trade dispute with the U.S. continued to boil. The Chinese currencies rallied on Friday after the People’s Bank of China (PBOC) announced supportive measures.

The onshore yuan was little changed at 6.8286 per dollar by 12:10AM ET (04:10 GMT), while the offshore yuan was also stronger against the dollar.

The PBOC said that it would impose a 20% reserve requirement on some trading of foreign-exchange forward contracts, effectively making it more expensive to short the yuan.

Separately, an hour after the announcement, Chinese authorities announced that it would impose tariffs, ranging from 5% to 35%, on $60 billion in U.S. goods that include many agriculture-related goods if the U.S. proceeded with placing more tariffs on Chinese imports.

The warnings came after U.S. President Donald Trump urged U.S. Trade Representative to consider raising the proposed tariffs on Chinese goods to 25% from the initial 10% earlier this month.

The U.S. Dollar Index, on the other hand, was up 0.06% to 95.09 on Monday following the development.

“The yuan kept falling when China did this last time in 2015, so I don’t think the PBOC’s move will significantly change the market tone,” Hao Hong, chief strategist at Bocom International Holdings Co., said by phone. “The trade war is nowhere near its end and China’s economy is slowing down, so why would the trend reverse?”

Meanwhile, the Chinese central bank set the daily reference rate at 6.8513, the weakest since May last year, though in line with analyst expectations.

Elsewhere, the AUD/USD pair fell 0.07% to 0.7393 as the U.S.-China trade war worsens. The Reserve Bank of Australia is forecast to keep its cash rate target at a record low 1.5% on Tuesday, where it’s been for about two years, according to reports.

The NZD/USD pair was down 0.09% to 0.6741 on Monday./investing.com

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