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Euro falls; yuan rebounds on central bank action
THE euro fell on Wednesday as a weaker purchasing managers' confidence in the bloc overshadowed better-than-expected data on business activity, while concerns about Washington's end-of-week deadline to impose tariffs on Chinese imports crimped trading.
The yuan was the big winner, gaining as much as 0.8 per cent as the Chinese currency built on its recovery from an 11-month low after the central bank intervened to stem its rapid slide.
Major currencies largely traded within ranges, however, with Independence Day celebrations in the United States discouraging traders from taking big positions, not least until there is some clarity about where the escalating US-China trade war is heading and the extent to which Europe will become embroiled.
China has put pressure on the European Union to issue a strong joint statement against US President Donald Trump's trade policies, European officials told Reuters.
European shares followed their Asian counterparts into the red as investors' worries about US tariffs on US$34 billion worth of Chinese goods that take effect on July 6.
Beijing has said that it will retaliate with tariffs on US products. "Markets are still in a wait-and-see mode, and risk sentiment is subdued," Commerzbank currency analyst Thu Lan Nguyen said.
The euro fell 0.1 per cent to US$1.1639 after data showed that eurozone business growth accelerated in June, making the European Central Bank more likely to tighten policy, but optimism among purchasing managers was at its lowest since late 2016, the Purchasing Managers Index survey found. The US dollar against a basket of six major currencies steadied at 94.650, remaining near 11-month highs after notching up three consecutive months of gains.
The offshore yuan rallied to 6.6168 against the US dollar, before giving up some of those gains. The yuan had rebounded sharply on Tuesday after reassuring remarks from Yi Gang, governor of the People's Bank of China.
US dollar trading is also expected to be rangebound as investors await the publication on Thursday of minutes from the Federal Reserve's June meeting, and Friday's US jobs data. Valuations remain supportive of the US dollar, with its trade-weighted basket still below long-term averages and the market pricing in two more interest rate hikes for 2018. REUTERS