Yuan wobbles on Trump's trade comments, details of Chinese rate reforms expected By Reuters

HONG KONG (Reuters) – The yuan fluctuated on Monday after US President Donald Trump said he was not yet ready to negotiate with China.

Traders were also cautious ahead of Tuesday's launch of China's new key reference rate, announced this weekend.

Analysts believe the reforms will open the door to rate cuts, perhaps as early as Tuesday, but are divided on the scale of the initial cut and on the benefits it could bring to small businesses in difficulty short term.

The spot yuan was trading at $ 7,0447 for a dollar at midday, roughly unchanged from the close of the last trading day and at a low point of 0.12% at the midpoint set by the People's Bank of China at 7,0365.

The central bank on Saturday announced the launch of long-awaited reforms aimed at reducing corporate borrowing costs and slowing growth, slowed by the long-running trade war with the United States.

The revised prime lending rate, which came into effect on Tuesday and tied to the medium-term loan facility (MLF) rates, equates to a 45-basis-point reduction in lending rates, ANZ analysts wrote. in a note published Monday. Several traders said they expect the new LPR to reduce by 10 to 15 basis points.

This adjustment will help achieve the State Council's goal of lightening the cost of financing small businesses by one percentage point, but tax cuts will also be part of it, according to a Shanghai-based trader.

"We need to know more about the additional measures," he said, another operator in Shanghai said.

However, unlike more open markets such as the United States, China's capital controls will likely limit the pressure of lower interest rates on its managed currency, said a Hong Kong-based operator. adding that "the exchanges will take place where the PBOC wishes."

Traders said trade talks between the United States and China would continue to dominate the direction of the yuan in the near term.

White House economic adviser Larry Kudlow said Sunday that trade officials from both countries would speak within 10 days and that a Chinese delegation would visit the United States for follow-up.

But Trump said the same day that he was "not ready" for an agreement with Beijing, hinting again that he would like the ongoing protests in Hong Kong to be resolved first.

Trump also said he would not like to deal with Huawei Technologies Co Ltd – even after Reuters and other media reported Friday that the US Department of Commerce should grant a reprieve to the company so that she could buy supplies from American companies.

The stock traded 0.14% lower than the spot on land at 7.0545 to the dollar.

Overall () increased slightly to 98,207 from the previous close of 98,142.

US Interest Rates in China – August 19, 2019 – https://fingfx.thomsonreuters.com/gfx/mkt/12/4892/4849/US%20China%20interest%20rate%20-%20Aug% 2019% 202019.jpg