Yuan falls to 11-year low as trade war rattles investors

London

CHINA'S yuan fell to an 11-year low in the onshore market and a record low offshore on Monday after the latest escalation in the US-China trade war rattled investor confidence.

US President Donald Trump announced an additional 5 per cent duty on US$550 billion in targeted Chinese goods on Friday, hours after Beijing unveiled retaliatory tariffs on US$75 billion worth of US products, sending stocks into a tailspin and investors rushing for the safety of bond markets.

Mr Trump on Monday sought to limit the fallout and smooth tensions, helping the yuan come off its lows and the US dollar recover against the Japanese yen. The US president said China had contacted US trade officials to say they wanted to return to the negotiating table. Beijing called for calm.

In China's onshore market, the yuan fell to 7.1500 per dollar, the lowest since February 2008.

In the offshore market, the yuan slid to as low as 7.187 yuan, the weakest since international trading in the currency began in 2010, before recovering to 7.1524 yuan - down 0.2 per cent on the day - after Mr Trump's upbeat comments.

In a sign that some calm had returned to markets, the Japanese yen - which investors regard as a safe-haven - fell 0.5 per cent to 105.86, having earlier hit a new seven-month high of 104.46.

Commerzbank analysts said "market sentiment has been undoubtedly hit hard as there is an even lower chance of a trade truce in the foreseeable future."

They said China could let the yuan "depreciate further to ease the tariff pains, and somehow weaponise the currency to anger Trump."

Elsewhere, the dollar rebounded and was last up 0.3 per cent against a basket of currencies. Versus the euro it rose 0.2 per cent to US$1.1117. The Turkish lira weakened more than one per cent against the dollar on Monday after briefly plunging to 6.47 in what market watchers described as a "flash crash" as Japanese investors slashed their exposure to riskier assets. The lira was last down one per cent at 5.8181.

The Australian dollar, a liquid proxy for global risk sentiment, earlier fell to US$0.6690, within a whisker of a recent decade-low of US$0.66775, before recovering to US$0.6766, up 0.2 per cent on the day. The New Zealand dollar slipped 0.2 per cent to US$0.6380 after earlier sliding to a level not seen since 2015.

Sterling fell 0.3 per cent to US$1.2239 as investors waited for the next developments in Britain's bid to get the European Union to renegotiate its Brexit withdrawal agreement. REUTERS