China's yuan, stocks near lowest in months as tariff hour looms

[HONG KONG] China's yuan traded near its weakest level since January as traders braced for additional US tariffs that may take effect within hours.

The currency climbed as much as 0.12 per cent in offshore trading, following a four-day slide that was its biggest since August. The yuan has already busted through its 200-day-moving average this week, en route to the 6.9 per US dollar level that it hasn't touched all year.

The Shanghai Composite Index is on course for its worst week in almost seven months, losing 7.4 per cent through Thursday.

Traders are preparing for the possibility that the Trump administration will raise duties on US$200 billion of Chinese goods on Friday to 25 per cent from 10 per cent. They were caught off guard by the US president's threats earlier in the week, rushing to protect against further losses in the yuan after the currency suddenly sank the most in more than three years. Overseas investors have been fleeing China stocks at a record pace.

All eyes will be on where the central bank decides to fix the currency. At stake is whether policy makers allow it to weaken, or whether the People's Bank of China opts for a stronger-than-expected fixing to signal support for the yuan.

Pressure on the yuan came from the country's banks on Thursday, according to traders, who said their proprietary desks were the most active sellers.

Delegations from the US and China are in Washington for the latest round of talks. The US tariff hike would kick in at noon Beijing time.

BLOOMBERG