Fundamental Comment

Yuan hits one-week low as US-China tensions escalate

Yuan hits one-week low as US-China tensions escalate

The Chinese yuan dipped to a one-week low versus the U.S. dollar on Thursday after escalation in the tensions between the U.S. and China that raised concerns about a renewed war between the two gigantic economies.

The onshore yuan was 0.03 percent down at 6.9968 per dollar, falling below the 7 level, where it hit a bottom of 6.9646 on Wednesday, which was the lowest since March.

Earlier today, the People's Bank of China (PBOC) set the midpoint rate at 6.9921 per dollar, compared to the previous fix of 6.9718. That was the lowest point in nearly a month.

As for the offshore yuan, it traded 0.3 percent down at 6.9966 per dollar after it registered a low at 6.9947 per dollar.

Meanwhile, eyes have returned again to the U.S.-Sino war with China, as President Trump ordered to close his countries’ consulate in Houston amid accusations of spying.

Trump also stressed that it was "always possible" other Chinese missions could be ordered to close as well.

On the other hand, markets are anticipating a similar action from Beijing, amidst expectations that China would close its U.S. consulate in the central city of Wuhan.

Despite the ongoing plunge in the U.S. dollar, the risk aversion by traders prompted them to sell the yuan and hold the green currency.

The woes of the Covid-19 spread continued to weigh on the market sentiment, as California recorded the highest daily increase in new cases and total infections worldwide surpassed 15 million.

American politicians are still struggling to agree a new stimulus package before the expiry of the undergoing one.

The dollar index extended its plummet for a fifth straight session to 94.71, a level not seen since March this year.

China’s CSI 300 index fell 2 percent at the beginning of the trading session before recovering some of the losses to finish 0.043 percent down at 4,712.44.

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