FOREX-Offshore Chinese yuan pares back gains as enthusiasm from tariffs delay wanes

Shutterstock photo

* Chinese yuan weak after one-week jump the day before

* Japanese yen retraces losses to trade higher

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga

LONDON, Aug 14 (Reuters) - The offshore Chinese yuanoffloaded on Wednesday the gains it made the day before on theback of the announcement that the United States will delay therecently announced tariffs on Chinese imports until later thisyear.

The fall in the yuan mirrored analysts' views that the delayin tariffs, although a positive step, wasn't even close toresolving the US-China trade war. A strengthening of theJapanese yen on Wednesday also reinforced these views and showedthat risk appetite hasn't fully made a comeback to the financialmarkets.

Weaker-than-expected Chinese economic data contributed toyuan falls. China's closely watched industrial output rose inJuly at the slowest pace in more than 17 years. urn:newsml:reuters.com:*:nB9N24U02P "The lack of visibility on trade war outlook means thatyesterday's price action (rise in yuan, fall in yen) is unlikelyto translate into a long-lasting trend," said ING analysts in anote to clients. "One should not get carried away," they said.

The offshore yuan jumped to a one-week high against thedollar on Tuesday after U.S. President Donald Trump backed offhis Sept. 1 deadline for 10% tariffs on remaining Chineseimports, delaying duties on cellphones, laptops and otherconsumer goods. The announcement was made following renewedtrade discussions between U.S. and Chinese officials.

On Wednesday, however, the yuan was down by 0.4% versus thegreenback at 7.0360 CNH=EBS , staying below the psychologicallevel it breached last week when the 10% tariffs were announced.On Wednesday, China had fixed the onshore yuan at 7.03, "theonly sign so far of China making any concessions" to the UnitedStates, said Esther Reichelt, an analyst at Commerzbank.

The Japanese yen was last up by 0.4% against the dollar at106.33 JPY=EBS , having reached a one-week low the day prior tothat.

"The mid-term trend is for yen gains, because the UnitedStates has not changed its tough stance on China," said ShuntaroIkeshima, chief manager of forex and financial products tradingat Mitsubishi UFJ Trust and Banking Co.

"There was a lot of short-covering overnight, but in Asiathe market quickly ran into real demand to buy yen. Once youadded the Chinese data, this managed to keep the yen firm."

Elsewhere in the foreign exchange market, major currencieswere little changed Wednesday morning.

The euro was flat at $1.1180EUR=EBS despite weakersecond-quarter German gross domestic product data as thequarter-on-quarter contraction was largely expected. Moreover,the year-on-year figure was higher than economists polled byReuters predicted.

Traders are waiting for the first estimate of eurozone GDPdata, due at 0900 GMT. A Reuters poll forecasts thatsecond-quarter GDP growth remained unchanged at 0.2%quarter-on-quarter and at 1.1% year-on-year.

Sterling was also steady, last flat at $1.2056GBP=D3 , andlittle changed against the euro at 92.73 penceEURGBP=D3 .However, current levels suggest investors aren't willing to takethe pound away from the multi-year lows it reached last week.

Traders are also awaiting inflation data in the UK at 0830GMT, which is expected to decline slightly in July to 1.9%year-on-year from the 2% seen in June.

Yuan ticks lower   https://tmsnrt.rs/2YNVA6sChina industrial output    https://tmsnrt.rs/2YOpAiC
(Reporting by Olga CotagaAdditional reporting by Stanley WhiteEditing by Peter Graff)

This article appears in: Politics , Stocks , World Markets
Referenced Symbols: EFX ,

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