PBOC governor says yuan fluctuations due to stronger dollar and external uncertainties

PBOC governor says yuan fluctuations due to stronger dollar and external uncertainties

PBOC governor says yuan fluctuations due to stronger dollar and external uncertainties

Losses were broad-based, with retailers and the food sector among the worst performers.

The yuan extended losses and has fallen around eight percent since the end of March - and is now at an 11-month low - adding to fears about the mainland as leaders struggle to get a cap on a debt mountain while also supporting growth. Blue chip companies recorded larger declines, with the CSI 300 index sinking nearly 3 percent.

Down Under, the S&P/ASX 200 erased early gains, but saw narrower declines compared to other regional markets. It sharply depreciated by 3.3 percent in June, the largest monthly drop ever. The Hong Kong market remained choppy and was last down 1.9 percent, while the Shanghai bourse edged up 0.05 percent. Japan's Nikkei edged to a near three-month closing low.

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The cautious mood in the market comes as investors keep an eye on trade tensions between the USA and its trading partners, most notably China.

A July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on US products.

"Potentially, we're moving into new, uncharted territory. Now, I think, the realization comes in that downside risk could be more significant", Rainer Michael Preiss, executive director at Taurus Wealth Advisors, told CNBC's "Capital Connection". The currency is allowed to trade up to 2 per cent either side of this fixed point. Short covering rallies should not be confused with trend reversals and provided traders continue to view escalating trade tensions will reduce the United States trade deficit thereby benefiting the dollar, gold will continue to remain out of favour.

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Qi Gao, emerging market Asia currency strategist at Scotiabank, said that while the yuan may consolidate at its current level before July 6, it will remain susceptible to the headlines and is unlikely to rebound markedly.

The Dow fell 132.36 points or 0.54 percent to 24,174.82, while the NASDAQ slid 65.01 points or 0.86 percent to 7,502.67 and the S&P 500 dropped 13.49 points or 0.49 percent to 2,713.22. That helped MSCI's world index to rise 0.2 per cent, inching further off recent 2-1/2 month lows. The Chinese benchmark index finished the Monday session down more than 22 percent from its 52-week high of 3,587.03. Then spilt lower after Saudi Arabia said it's prepared to use its spare production capacity, estimated at 2million barrels per day, to balance the global oil market and all but confirming President Trump's weekend tweets that he asked Saudi Arabia to increase oil production.

Elsewhere in currency markets, the euro, which had been pressured by political uncertainty in Germany, pared losses in late USA trade on reports Chancellor Angela Merkel's conservatives settled a row over migration that threatened to topple her governing coalition after interior minister Horst Seehofer dropped his threat to quit.

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