August 5, 2019 / 2:46 PM / 4 months ago

FOREX-Yuan drops below 7 per dollar as trade war escalates

    * Yuan breaks key 7 level against dollar
    * Trump calls Chinese currency move "manipulation"
    * Yen jumps to seven-month high in scramble for safety

 (New throughout, updates trading and comments to U.S. market
open, new byline, changes dateline, previous LONDON)
    By Karen Brettell
    NEW YORK, Aug 5 (Reuters) - China let its yuan weaken below
7 to the dollar on Monday, an 11-year low, leading to broad risk
aversion on concerns about the escalation of the U.S.-China
trade war.
    Fearful of the impact on global growth, investors dumped
export-oriented Asian currencies and rushed into safe havens,
with the Japanese yen surging to a seven-month high.
    Chinese authorities, who had been expected to defend the
psychologically important level of 7 per dollar, allowed
the currency break through the floor to its lowest in the
onshore market since the 2008 global financial crisis.
    “We’ve had a pretty meaningful reaction, where 7 in
particular was a level that the market was very sensitive to in
dollar/CNY. Now that we’ve broken that, risk appetite has taken
a hit,” said Brian Daingerfield, head of G10 FX strategy for the
Americas at NatWest Markets in Connecticut.
    “I think there’s a sense that President Trump might try and
escalate in terms of a reaction, if he thinks that this was a
deliberate move by the Chinese to try and weaken their currency
artificially,” Daingerfield said.
    The weaker Chinese currency came after Beijing vowed on
Friday to fight back against U.S. President Donald Trump's
decision to impose 10% tariffs on $300 billion of Chinese
imports, ending a month-long trade truce.
    Trump on Monday called the move in the Chinese currency “a
major violation” and “currency manipulation.”
    The escalation of the trade dispute has led investors to be
on watch for any U.S. efforts to weaken the greenback, though a
direct intervention is still viewed as unlikely.
    Japan's yen, which investors buy in times of risk aversion,
rose to its highest since a January flash crash. The yen was
last up 0.5% at 106.05, after hitting 105.80 earlier.
    Japan's top currency diplomat, Yoshiki Takeuchi, warned that
Tokyo was ready to intervene if yen gains threatened its
export-reliant economy.
    The Swiss franc, another safe-haven currency, strengthened
0.86% to 0.9738 francs per dollar, the strongest since
June 25.
    The Australian dollar, often used as a proxy bet on
China, fell to a seven-month low of $0.6749, before rising back
to $0.6776.

========================================================
    Currency bid prices at 10:32AM (1432 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1189        $1.1107     +0.74%         -2.44%      +1.1200     +1.1105
 Dollar/Yen       JPY=        106.0500       106.5800    -0.50%         -3.82%      +106.6700   +105.8000
 Euro/Yen         EURJPY=     118.67         118.39      +0.24%         -5.98%      +118.7300   +117.7000
 Dollar/Swiss     CHF=        0.9736         0.9820      -0.86%         -0.79%      +0.9840     +0.9735
 Sterling/Dollar  GBP=        1.2161         1.2154      +0.06%         -4.67%      +1.2188     +1.2102
 Dollar/Canadian  CAD=        1.3180         1.3204      -0.18%         -3.33%      +1.3247     +1.3177
 Australian/Doll  AUD=        0.6776         0.6799      -0.34%         -3.87%      +0.6804     +0.6749
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0895         1.0908      -0.12%         -3.19%      +1.0936     +1.0865
 Euro/Sterling    EURGBP=     0.9199         0.9136      +0.69%         +2.39%      +0.9205     +0.9133
 NZ Dollar/Dolar  NZD=        0.6533         0.6540      -0.11%         -2.74%      +0.6541     +0.6490
 Dollar/Norway    NOK=        8.9204         8.9146      +0.07%         +3.26%      +8.9516     +8.8931
 Euro/Norway      EURNOK=     9.9837         9.9027      +0.82%         +0.76%      +9.9905     +9.8924
 Dollar/Sweden    SEK=        9.6184         9.6348      +0.55%         +7.30%      +9.6515     +9.6130
 Euro/Sweden      EURSEK=     10.7640        10.7053     +0.55%         +4.88%      +10.7722    +10.6928
 
    
    

 (Additional reporting by Tommy Wilkes in London
Editing by Nick Zieminski)
  
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