Yuan drops on China rule change; US dollar ticks up

Yuan drops on China rule change; dollar ticks up

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(Oct 12): The offshore yuan fell in early trading after Chinese policy makers acted to restrain its strength by making it easier to bet against. Asian stocks looked set for a mixed start.

The yuan was about 0.6% lower against the dollar, which ticked higher against major peers. The Australian dollar also slipped as foreign exchange markets opened. S&P 500 futures were little changed after the benchmark ended higher last week, with some traders betting lawmakers are moving closer to reaching an agreement on stimulus. Contracts in Japan and Australia were flat. Crude oil declined and gold was steady.

The daily currency fixing in China will be closely watched on Monday after the central bank removed rules that made it expensive to bet against the yuan. Meantime, the U.S. stimulus saga rolls on, with President Donald Trump and House Speaker Nancy Pelosi blaming each other for a lack of progress on a deal. Focus will soon turn to earnings season on Wall Street with big banks due to report results.

“Markets that once feared a Democratic sweep now appear to be hoping that the Democrats do take control of the Senate, with the polling leads for Biden boosting optimism for greater stimulus,” said Ben Emons, managing director for global macro strategy at Medley Global Advisors.

Trump was cleared by his doctor and is no longer considered a coronavirus transmission risk to others, meeting the criteria to end self-isolation, his physician Sean Conley said. The virus continued its unrelenting spread in Europe, with France posting another daily infection record and Germany reporting the most Covid-related deaths since May.

Here are some key events coming up:

  • Monday is the Columbus Day holiday in the U.S.
  • U.K. Prime Minister Boris Johnson set a deadline of Thursday to thrash out the outline of an EU trade deal.
  • Earnings from JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc. and Johnson & Johnson are due this week.
  • IMF/World Bank meetings continue.

These are the main moves in markets:

Stocks

  • S&P 500 futures dipped 0.2% as of 7:01 a.m. in Tokyo. The gauge rose 0.9% on Friday.
  • Futures on Japan’s Nikkei 225 were little changed on Friday.
  • Hang Seng Index futures rose 0.7% on Friday.
  • Futures on Australia’s S&P/ASX 200 Index ended Friday flat.

Currencies

  • The offshore yuan fell 0.6% to 6.7280 per dollar.
  • The yen slipped 0.1% to 105.72 per dollar.
  • The euro bought US$1.1819, down 0.1%.
  • The Aussie fell 0.1% to 72.29 U.S. cents.

Bonds

  • The yield on 10-year Treasuries ended last week at 0.77%.

Commodities

  • West Texas Intermediate crude fell 0.8% to US$40.28 a barrel.
  • Gold slipped 0.1% to US$1,927.70 an ounce.