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US trade threats, intimidation won't ever work: China

25 July 2018

When Washington announced it was to impose tariffs on US$50 billion worth of Chinese products on June 15, China's Ministry of Commerce immediately issued a statement, at 1:30am local time that Saturday, announcing its retaliatory measures, with a detailed list of USA products that Beijing would target for additional import duties.

"The government is sending a clear signal that it is preparing to defend growth, ".

The yield on USA 10-year Treasuries rose 7 basis points to a month-high 2.96 percent as investors weighed up the impact of a new policy framework for the Bank of Japan, which has been buying government bonds as a means to stir inflation in the world's third-biggest economy. The yield has fallen more than 50 basis points since late January, according to Thomson Reuters data.

Gold prices rose further on Monday as the dollar eased to its lowest in almost two weeks after U.S. President Donald Trump criticised the Federal Reserve's interest rate tightening policy.

Meanwhile, the Aussie and Kiwi Dollars also benefited from weaker U.S. Dollar where both rose against their U.S. counterpart to finish the session in the green at 0.7415 AUDUSD and 0.6807 NZDUSD respectively.

USD/JPY: The dollar slumped to a 2-week low against the Japanese yen following reports the Bank of Japan was debating moves to scale back its massive monetary stimulus.

The fiscal policy will focus on cutting taxes for companies while the pace of local governments' special bond issuance will be quickened, it quoted the cabinet as saying. China responded with the same measure to the same volume of USA imports. It was the third such cut this year.

Their growing confidence in the US currency does fly in the face of history, which shows that a full-blown trade war typically causes dollar weakness in the end.

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Trump's comments also hit the greenback .dxy , which was last down 0.2 percent at 94.25 against a basket of six major peers, and steepened long-term Treasury yields.

The Chinese currency has lost positions since the summer of 2015 and because of the stock market crisis, which has led many depositors to invest overseas.

The kiwi traded at 4.6068 Chinese yuan from 4.6053 yuan yesterday. The offshore yuan fell almost 0.6 percent to a low of 6.8448 per dollar, its weakest level since June 2017. Australian shares .axjo were off 0.1 percent while the New Zealand market .nz50 was down 0.4 percent. It was trading at 6.8265 as of 0200 GMT.

The People's Bank of China (PBOC) set the midpoint rate at 6.7891 per dollar ahead of the market open, its weakest since July 11, 2017. The fixing matched market forecasts and dragged the spot rate lower.

U.S. Treasury Secretary Steven Mnuchin said last week the United States was monitoring the recent weakness in China's currency yuan and would review whether it had been manipulated.

"The market now believes that chances for the yuan to rebound are getting low, unless there would be a strong official guidance from the authorities".

"We are still overweight dollars", Graf said.

US trade threats, intimidation won't ever work: China