China Yuan Fixing Shows Preference for Stability Over Weakness

(Bloomberg) --

The Chinese authorities sent a clear signal via the daily currency fixing that it wants to maintain stability in the yuan as the U.S. amps up pressure on the nation’s imports.

The People’s Bank of China set the reference rate for onshore trading stronger than 6.9 per dollar on Friday, even after the offshore currency tumbled to as low as 6.9786 in the wake of President Donald Trump’s announcement about new tariffs. That helped widen the gap between the onshore spot rate and the fixing to the most since May 13.

The PBOC hasn’t set the fixing weaker than 6.9 since December, suggesting officials are reluctant to use yuan weakness as a weapon in the trade war, especially in the run-up to the 70th anniversary of the founding of the People’s Republic.

China will take countermeasures if the U.S. implements additional tariffs, Foreign Ministry spokeswoman Hua Chunying said at a briefing on Friday, without giving details. The nation will never retreat on important issues, she added.

The yuan was down 0.65% at 6.9430 a dollar as of 4:48 p.m. in Shanghai, taking the drop this week to 0.9%. A gauge of expected swings in the yuan over the next month spiked the most since China’s shocking devaluation in August 2015.

To contact the reporter on this story: Tian Chen in Hong Kong at tchen259@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, ;Richard Frost at rfrost4@bloomberg.net, Philip Glamann

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