Dollar takes breather as trade concerns linger, yuan remains in focus

China's Currency Makes Round Trip as Trade War, Growth Concerns Whipsaw Market

China's Currency Makes Round Trip as Trade War, Growth Concerns Whipsaw Market

Trump told the World Trade Organization on Monday that "we'll be doing something" if the United States is not treated properly, just hours after the European Union said that USA automotive tariffs would hurt its own vehicle industry and prompt retaliation.

In early European trade London rose 0.5 percent, Paris added 0.4 percent and Frankfurt gained 0.7 percent.

The fresh declines came as the yuan continued to weaken, with the currency trading at 6.6503 to the dollar at 3:10 p.m. HK/SIN.

On equity markets, Hong Kong dived as much as 3.3 per cent at one point to nine-month lows, hit also by a U.S. move to block China Mobile from offering services to the United States market.

Major currencies marked time on Wednesday and the Chinese yuan recovered from 11-month lows after authorities took steps on Tuesday to calm financial markets rattled by trade war worries, report Agencies.

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 yuan's weakening has reflected the narrowing spreads between interest rates of China and the USA, and an overly depreciated yuan will bring no benefit, Tai said.

Hao Hong, chief strategist at Hong Kong broker BOCOM International, said it's too early to call the bottom.

The US Commerce Department on Monday added to the standoff by recommending against the approval of China Mobile's seven-year-old application to enter the US market, citing national security concerns.

Software shares posted strong performance, with Yuanguang Software Information Co., Ltd rising 3.56 percent to close at 8.72 yuan.

Elsewhere in currency markets, the euro, which had been pressured by political uncertainty in Germany, pared losses after 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.

Asian shares dropped in tentative morning trade on Tuesday as sentiment remained fragile in the face of tense trade relations between the United States and major economies, with investors braced for another potentially rocky day for Chinese markets.

Shares of Mercedes-maker Daimler, BMW, Porsche and Volkswagen surged as much as 5 percent after reports of a USA offer to suspend tariff threats on EU-made cars if the bloc lifts duties on US vehicles.

Shanghai rose 0.4 percent and Singapore lost 0.2 percent, while Tokyo ended 0.1 percent lower.

The pair last traded at C$1.3115, its highest level in 2-1/2 weeks.

The Aussie was steady at $0.7338 after dropping to $0.7311 overnight, its lowest since January 2017.

USA crude oil futures settled 0.3 percent higher at $74.14 a barrel after rising above the $75 mark for the first time in 3-1/2 years.

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