Emerging market stocks hit a six-month high yesterday on hopes the United States and China could hammer out a partial trade deal, while the yuan broke past the key 7-per-dollar mark for the first time since early August.
The yuan strengthened by 0.6% to 6.9931 per dollar in offshore trading, leading a swathe of developing world currencies higher.
The MSCI EM currencies index rose 0.2%. Reports that China is pushing US President Donald Trump to remove more tariffs imposed in September as part of a “phase one” US-China trade deal boosted risk appetite among investors.
“Although the market may have mostly priced in a scenario in which the US delays or cancels the December 15th tariffs, expectation of a tariff rollback seems still limited,” Citi’s Lu Sun wrote in a client note. “We thus expect USDCNH to trade towards ~6.90 area if the September tariff rollback is realised.”
A source briefed on the talks said Chinese negotiators want Washington to drop 15% tariffs on about $125bn worth of Chinese goods that went into effect on September 1. They are also seeking relief from earlier 25% tariffs on about $250bn of imports.
The yuan’s gains came even as China’s central bank cut the interest rate on its one-year medium-term lending facility (MLF) loans for the first time since early 2016 as policymakers work to prop up a slowing economy.
Trade optimism and easing measures helped stocks in China and Hong Kong gain about 0.5% even as data showed services sector activity expanded at its slowest pace in eight months in China. The EM stocks index jumped half a per cent to hit its highest level since May 6, with Russia’s stock market touching a record high as oil prices remained steady.
The trade-sensitive Korean won, up 0.6%, gained for the seventh session in eight, while Philippine peso rose 0.3% after data showed the annual rate of inflation eased for a fifth straight month in October, but matched analysts’ expectations.
from Gulf Times https://ift.tt/34sK6no
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