The yuan reaches its lowest level in 11 years in terms of trade, draws support from public banks By Reuters

SHANGHAI (Reuters) – The Chinese yuan slid to its lowest level in 11 years against the dollar on Thursday, despite the support of major public banks in the spot and futures markets.

Traders said the sentiment was fragile, recent news offering little hope of concluding a trade deal between China and China and new US taxes on Chinese products are expected to come into force on September 1st.

US President Donald Trump said on Wednesday that he was "elected" to tackle trade imbalances with China, even as congressional researchers warned him that his rights to customs would harm the US economy.

"The market pays particular attention to the China-US trade dispute and its impact on the yuan is much heavier than other factors, such as economic fundamentals," said a bank operator. Chinese in Shanghai.

Before the opening of the market, the People's Bank of China (PBOC) set the median rate at at 7,049 for a dollar before the opening of the market, lower than the previous fix of 7.0433.

Yuan Spot slipped to 7.0752 early in the session, its lowest level since March 2008. He changed hands at 7:07, noon, 107 pips from the close of the previous session.

The perceived state banks received dollar cash on the futures market before selling the banknote in the onshore spot market, two traders said.

One of them said that state banks were selling dollars at around 7.07 yuan in the spot market in order to avoid more net losses within the company. 39, local unit.

Movements have injected a note of caution, fueling speculation that the authorities could try to establish a floor for the yuan around this level in the near term, the trader added.

Many investors generally believe that state banks act on behalf of the central bank on the country's foreign exchange market, although they can also trade on their own behalf.

Large state banks frequently resort to such tactics

In recent weeks, as the authorities sought to slow the decline of the currency after allowing the dollar to cross the dollar on August 5, Washington called China a manipulator of the currency a few hours after the move, which was shaking the global financial markets.

The acquisition of dollars via dollar / yuan swaps, and then the spot market sale, have certainly put an end to stronger declines in the yuan, traders said.

One merchant said that the dollar demand resumed this week and could have resulted in the local currency at 7.1% per dollar if the state banks did not intervene. In addition, major oil companies must also pay in dollars for their seasonal payments.

Serena Zhou, an economist for China at Mizuho Securities in Hong Kong, said the violation of the closely watched level 7 gave the yuan more flexibility. She doubts that a trade agreement can be concluded soon and is expected to further weaken the yuan in the coming months.

Zhou expects the yuan to end the year at 7.1 for a dollar.

In the offshore market, signs of tightening liquidity in Hong Kong continued to offer slight support to the yuan.

Borrowing costs fell between tenors on Thursday but remained relatively high in the financial center on Thursday morning, as indicated by CNH's interbank rate benchmark in Hong Kong (CNH Hibor). ).

the was trading at $ 7.0863 for a dollar at noon.

The gap between the onshore and offshore yuan is set at 123 pips at midday, against 247 pips on Monday.

The global () remained stable at 98.295 at noon of the previous close of 98.295.