On Tuesday (January 14) in Asia, financial markets again volatile. The US Treasury’s decision to drop its designation of China as a “currency manipulator” spurred risk appetite and sent gold prices tumbling, with spot bullion edging closer to $1,535 an ounce after falling below the $1,540 mark. At one point, the onshore renminbi rose nearly 150 points against the dollar. The safe-haven yen was also under pressure, with the dollar breaking through the 110 marks.
China is no longer listed as a currency manipulator, the US Treasury said on Monday. The move comes two days before the US and China are due to sign a key “phase one” trade deal.
“The Treasury has decided that China should no longer be listed as a currency manipulator at this time,” the Treasury said in its semi-annual report on currency intervention.
Spot gold has been under pressure on the news, with prices earlier falling below $1,540 an ounce to as low as $1,535.75.
On August 6, 2019, the US Treasury designated China a “currency manipulator”, the first time in 25 years that the US has designated China a currency manipulator.
The us Treasury said the first phase of the trade deal, to be signed this week, contained enforceable Chinese commitments not to devalue the renminbi and not to set exchange rate targets for competitive purposes.
Treasury Secretary Steven Mnuchin said in a statement: “Treasury has helped reach an important first phase agreement with China that will lead to greater economic growth and opportunity for American workers and businesses. “China has made an enforceable commitment to avoid competitive devaluations while promoting transparency and accountability.”
The Treasury report concludes that there are 10 countries whose exchange rate policies need to be closely monitored, but that none of the major U.S. trading partners meet the criteria set by two foreign exchange manipulation laws passed in 1988 or 2015. Countries worth examining are China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Switzerland, and Vietnam.
Indeed, gold has come under pressure recently as tensions between the US and Iran have eased and amid optimism about us-china trade.
Overnight, gold fell, Orchard Forex analyst Jim Langlands wrote on Tuesday. From the technical charts, gold has the potential to fall further.
The onshore yuan rose to 6.88 against the dollar in early Asian trading on Tuesday, up nearly 150 points from the previous close
On Tuesday, the yuan was trading at 6.8954 against the dollar, up 309 points. The central parity rate last traded at 6.9263, while the onshore renminbi closed at 6.8942.
On Monday, both the onshore and offshore yuan rose above the 6.90 marks against the dollar. The onshore yuan gained 348 points and the offshore yuan gained 315 points.
Wen bin, chief researcher of China Minsheng Bank, believes that from the news side, the geopolitical situation has eased, risk aversion fell, the market is optimistic about the next phase of the RMB exchange rate.
The yen fell below y110 for the first time since may last year after hitting an intraday high of 110.20 in Asia on Tuesday as the prospect of improved trade dented demand for safe-haven assets.
The yen has fallen about 1.3 percent against the dollar since 2020, erasing all last year’s gains.
Analysts noted that the yen’s safe-haven appeal had also been weakened by the easing of tensions between the US and Iran, with the currency last week Posting its biggest fall since October.
Amid optimism about trade between the U.S. and China, the big trade news of the week will be the first phase of a trade deal between the U.S. and China scheduled to be signed on Wednesday.
At the invitation of the us side, Liu he, a member of the political bureau of the communist party of China central committee, vice-premier of the state council and Chinese leader of the comprehensive economic dialogue, will lead a delegation to Washington from January 13 to 15 to sign the first phase of the economic and trade agreement with the US side, said Gao Feng, spokesperson of the ministry of commerce at a regular press conference on January 9. The two teams are in close communication on specific arrangements for the signing of the agreement.
China and the United States have previously gone through necessary procedures such as legal review, translation, and proofreading, and communicated closely on the signing of the agreement. According to the statement of the Chinese side, through the joint efforts of the economic and trade teams of the two countries, the two sides have reached an agreement on the text of the first stage economic and trade agreement based on the principles of equality and mutual respect.
The signing ceremony will take place at the White House at 11 a.m. Wednesday. About 200 people, including representatives of major U.S. trade groups, will attend the signing ceremony.