HONG KONG (Reuters) – The yuan faltered on Monday after US President Donald Trump said he was not ready to trade with China yet.
Traders were also cautious before debuting China's new lending rate on the benchmark index on Tuesday, which was announced this weekend.
Analysts believe the reforms will open the door to interest rate cuts, possibly as early as Tuesday, but are divided by the size of an initial reduction and how much it can help fight smaller companies in the near term.
Spot yuan was trading at $ 7,0447 at noon, largely unchanged from the recent session close and 0.1
On Saturday, the central bank uncovered long-awaited interest rate reforms to help lower corporate borrowing costs and support growth slowdown, which has been dragged out by the protracted trade war with the United States.
The renewed loan interest rate (LPR), which is effective on Tuesday and linked to interest rates in medium-term lending facilities (MLFs), corresponds to a 45 basis point cut on loans, ANZ analysts wrote in a note on Monday. Several traders said they expect the new LPR to trim by 10 to 15 basis points.
Tweak will help achieve the government's goal of easing financing costs for small businesses by 1 percentage point, but tax cuts will also bear some of that, according to a Shanghai-based trader.
"We need to hear more about the additional measures," to measure how far the LPR and MLF rates will fall, said another trader in Shanghai.
However, unlike more open markets such as the United States, China's capital controls will likely thank the pressure of lower interest rates on the exchange rate, said a Hong Kong-based trader, adding "it will trade where the PBOC wants it to be . "
Traders said the US and Chinese trade talks will continue to dominate the yuan's direction in the short term.
White House economic adviser Larry Kudlow said on Sunday that trade officials from the two countries would speak within 10 days and a Chinese delegation flies to the United States to follow up.
But Trump said the same day that he was "not ready" for a deal with Beijing, again suggesting that he wants to continue protests in Hong Kong resolved first.
Trump also said he would not like to deal with Huawei Technologies Co Ltd – even after Reuters and other media reported on Friday, the US Department of Commerce is expected to issue a request for the company to buy supplies from US companies.
It traded 0.14 percent softer than the onshore spot of 7.0545 per dollar.
The global () rose slightly to 98.207 from the previous close of 98.142.
U.S. China Interest Rate – August 19, 2019 – https://fingfx.thomsonreuters.com/gfx/ mkt / 12/4892/4849 / US% 20China% 20 Interest% 20rate% 20-% 20Aug% 2019,% 202019.jpg
Fusion Media or anyone involved in Fusion Media will not be liable for any loss or damage as a result of the information including the data, offers, charts and purchase / sale of signals on this site. Be fully informed about the risks and costs associated with trading in the financial markets, it is one of the most risky forms of investment possible.