Yuan drops to 11-year low as trade war undermines investor confidence

LONDON (Reuters) – The Chinese yuan has fallen to its lowest level in 11 years in the onshore market and its record low Monday after the latest escalation of the trade war between the United States and China that has shaken the investor confidence.

President Donald Trump on Friday announced an additional 5% tariff on $ 550 billion of targeted Chinese goods, after Beijing announced retaliatory tariffs on $ 75 billion worth of US goods.

At the G7 meeting in France this weekend, Trump sowed confusion by stating that he had perhaps had doubts about the tariffs.

On Monday, he said China had contacted US trade officials to let them know that they wanted to return to the negotiating table – these comments helped the yuan to recover from its lows.

In the Chinese onshore market, the yuan fell to 7.1500 to the dollar, its lowest level since February 2008.

In the offshore market, the yuan slipped to 7.187 yuan, the lowest since the beginning of international trade in 2010, before rising to 7.1624 yuan – down 0.4% – after Trump's optimistic comments on a commercial agreement.

The Japanese yen, considered by investors as a safe haven, lost 105% of its value, to 105.76 euros, after reaching a new high of seven months to 104.46 Monday.

Analysts at Commerzbank said that "the sentiment of the market has undoubtedly been hit hard, because the chances of a trade truce are even lower in the near future".

They said China could let the yuan "depreciate further to ease tariff pressures and, one way or another, arm the currency against Anger Trump. to investor confidence.

Elsewhere, the dollar rebounded and was up 0.3% against a basket of currencies.

Compared to the euro, it increased 0.2% to 1.115 USD.

Writing ahead of Trump's comments helping the dollar to bounce back, Marshall Gittler, strategist at ACLS Global, pointed out that the greenback is not behaving like a safe haven.

"The decision taken today suggests that the market is beginning to wonder if Trump is not shooting himself in the fire, without upsetting the US economy, with his endless trade war," he wrote. .

The Turkish lira weakened around 1% to more than 5.8 against the dollar on Monday, after briefly plummeting to 6.47 in what market watchers called a "flash crash," as Japanese investors reduced risky assets.

The Australian dollar, a liquid substitute for global risk sentiment, has previously fallen to $ 0.6690 from a low of $ 0.66775 in the last decade before rising to $ 0.6750.

The New Zealand dollar slid 0.5% to $ 0.6342 overnight, a level not seen since 2015.

The pound sterling lost 1.2% to $ 1.2245, mainly due to the dollar's fluctuations, as investors waited for the next developments of the British operation to get the European Union to renegotiate its agreement to withdraw from the dollar. Brexit.