• The U.S. dollar weakened against the euro on Tuesday as the Chinese yuan showed more stability, after the greenback reached an almost five-week high against the single currency on Monday.
The yuan CNH= has strengthened to 6.8284 from 6.9122 on Friday, when China’s central bank raised the cost of shorting the currency. That has helped to stem an approximately 7 percent decline since mid-June.
The dollar index .DXY was down 0.10 percent at 95.264. It had risen to 95.652 on July 19, its highest since July 2017. It has struggled to break much above the 95.5level, which it has tested multiple times in the past two months.
The euro EUR= gained 0.24 percent against the greenback to $1.1581. It has some technical support at around $1.15.
Hopes that the yuan may be stabilizing bolstered the euro, which has become more correlated with yuan/dollar moves as trade tensions escalate.
• “Dollar/CNH is driving everything in G10, especially the euro,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.
“What the market was trying to figure out was, is China intentionally trying to weaken their currency or is China just letting their currency weaken?” said McCormick. “I think now that we’re getting a little bit of certainty maybe it will reduce the volatility in dollar/CNH, which in turn creates that floor for the euro at a lower end of the band.”
• The main U.S. economic focus this week will be Friday’s consumer price inflation report for July, which is expected to show a 0.2 percent increase in core inflation in the month, according to a Reuters poll.
• The United States will begin collecting tariffs on another $16 billion in Chinese goods on Aug. 23, the U.S. Trade Representative's office said on Tuesday as it published a final tariff list targeting 279 import product lines.
The latest list brings to about $50 billion in goods that now face a 25 percent tariff that U.S. President Donald Trump has imposed on Chinese imports in an escalating trade war over China's intellectual property practices and industrial subsidy policies. China has vowed to match Washington's tariff moves with duties on an equivalent worth of U.S. products.
• Companies doing business with Iran will be barred from the United States, President Donald Trump said on Tuesday, as new U.S. sanctions took effect despite pleas from Washington’s allies.
Iran dismissed a last-minute offer from the Trump administration for talks, saying it could not negotiate while Washington had reneged on a 2015 deal to lift sanctions in return for curbs on Iran’s nuclear program.
European countries, hoping to persuade Tehran to continue to respect the deal, have promised to try to lessen the blow of sanctions and to urge their firms not to pull out. But that has proven difficult: European companies have quit Iran, arguing that they cannot risk their U.S. business.
• Oil prices held steady on Wednesday, supported by a report of rising U.S. crude inventories as well as the introduction of sanctions against Iran.
Front-month U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $69.21 per barrel at 0012 GMT, up 4 cents from their last settlement.
Brent crude oil futures LCOc1 were at $74.63 per barrel, down two cents after a 90 cent gain in the previous session.
Reference: Reuters, Bloomberg
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