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The Chinese yuan on Monday tumbled to its lowest level since Christmas Day 2018 as the fallout from the trade spat between the U.S. and China continues.
The offshore yuan USDCNH, +1.0358% fell to an intraday low at 6.9072, and in most recent trade a single dollar grabbed 6.9033 yuan.
Trade talks between the U.S. and China ended with no deal on Friday, with U.S. President Donald Trump defiant on Twitter over the weekend, claiming the U.S. is in an advantageous position after boosting tariffs Friday on $200 billion of Chinese goods to 25% form 10% and threatening to put levies on the full range of Chinese goods. Beijing on Monday moved to retaliate, announcing tariffs as high as 25% on $60 billion of Chinese goods.
Editorials in newspapers sympathetic to the Chinese Communist Party said the country was fully prepared for a difficult trade war and won’t bend to pressure policies. Investors are now waiting to see what retaliatory measures China may respond with.
Read: Here’s how hard the escalating tariff fight will hit the global economy
What are analysts saying?
“Talks ended Friday with no breakthrough, and no date has been set for the next round. Despite constructive spin from both sides, we remain pessimistic near term. Indeed, rhetoric from both sides over the weekend suggest things will get worse before they get better,” wrote analysts at Brown Brothers Harriman.
“Reports suggest the U.S. is giving China one month to reach an agreement before the second phase of U.S. tariffs kicks in on another $325 billion of Chinese imports.”
USD/CNH
A shred of optimism came from a comment by the White House’s chief economic adviser Larry Kudlow, who said Trump may meet with China President Xi Jingping in late June at the G-20 international conference in Japan.
U.S. stock futures pointed to a sharply lower start for Wall Street.
Dow futures YMM9, -1.99% fell more than 300 points, or 1.2% S&P 500 futures ESM9, -2.04% were off 1.3% and Nasdaq-100 futures NQM9, -2.71% lost 1.7%.
Haven currencies find demand
The Japanese yen and Swiss franc rose Monday, as the stalemate over trade talks between the U.S. and China pushed investors toward assets perceived as havens.
The yen USDJPY, -0.78% climbed to ¥109.67 from ¥109.95 late Friday in New York, while the Swiss franc rose 0.4%, with a single dollar grabbing 1.0078 francs.
Meanwhile, risk-related currencies fell with the Australian dollar AUDUSD, -0.4715% losing 0.5% and the New Zealand dollar NZDUSD, -0.1364% falling 0.2%.
As China is Australia’s main trading partner, the Australian dollar is sensitive to trade headlines, and investors have also been betting on an interest-rate cut from Australia’s central bank, given weak economic data.
In most recent trade the Aussie was at $0.6969 and the Kiwi fell to $0.6580.
Read: Australian housing finances falls in March
The ICE U.S. Dollar Index, DXY, -0.25% a measure of the greenback’s strength versus six trading rivals, just slightly softer at 97.273 after tapping a three-week low of 97.132 last Friday.
Read: Larry Kudlow contradicts President Trump on a critical aspect of the trade war
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