Asian markets edge higher as China fixes yuan at weakest level since 2008

Big 5

Asian markets traded higher Thursday afternoon as Chinese customs data showed a surprise jump in the country’s July exports despite a protracted trade war with the United States.

Investors are keeping a close eye on the yuan, which crossed the psychologically important level of 7 per dollar again, after the Chinese central bank set a midpoint reference that was the weakest in more than a decade.

Mainland Chinese stocks gained, as the Shanghai composite rose 0.91 percent and the Shenzhen composite added 1.04 percent . The Shenzhen component advanced 0.937 percent while Hong Kong’s Hang Seng index gained 0.67 percent .

In Japan, the Nikkei 225 rose 0.45 percent while the Topix index recovered from an earlier slip to trade fractionally higher.

Over in South Korea, the Kospi added 0.98 percent. Meanwhile, Australia’s S&P/ASX 200 traded up 0.35 percent.

The MSCI Asia ex-Japan index rose 0.75 percent.

Yuan midpoint

The People’s Bank of China’s daily fix of the yuan midpoint was set at 7.0039 per dollar on Thursday — its weakest since April 2008. China’s central bank allows the exchange rate to rise or fall 2 percent from that number in what is also known as the onshore yuan, which last traded at 7.0424 against the greenback.

China is letting the yuan weaken to counteract the effects of higher tariffs, said Kevin Leung, executive director of investment strategy at Haitong International Securities.

“It will help in the short term but then … they still need for the economy to be stronger,” Leung told CNBC’s “Street Signs” on Thursday. “I guess there’s gonna be some (yuan) appreciation gradually.”

The Chinese yuan was under the spotlight earlier this week after it crossed a closely-watched 7 barrier against the dollar, leading the U.S. Treasury Department to label China a currency manipulator.

The offshore yuan, used by foreign investors and banks, last traded at 7.0670 against the dollar.

China trade numbers

Chinese customs data revealed exports for July rose unexpectedly, growing 3.3% on-year. Imports for the month fell 5.6 percent on-year, which left China with a trade surplus of $45.06 billion in July, compared to a $50.98 billion surplus in June, Reuters reported.

“A lot of manufacturers are front-loading,” Lu Yu, managing director and portfolio manager of Allianz Global Investors, told CNBC on Thursday. She explained that’s it’s difficult for them to immediately shift their factories outside China.

As a result, trade between China and other countries is likely to continue, Yu said. She added that the depreciation in the yuan is also helping the world’s second-largest economy export its goods beyond the U.S.

Beijing is locked in an ongoing trade fight with Washington where both countries have placed tariffs on billions of dollars worth of each other’s goods.

Those developments have roiled markets for more than a year, and there have been signs the rafts of additional tariffs from both sides are having real effects on economies around the world.

In market action overnight on Wall Street, the Dow Jones Industrial Average closed 22.45 points lower at 26,007.07 while the Nasdaq Composite added 0.4 percent to finish its trading day at 7,862.83. The S&P 500 closed 0.1 percent higher at 2,883.98.

Shares stateside mostly recovered from an earlier slip that saw the Dow plunging more than 500 points at one point as the closely watched 10-year Treasury yield briefly hit a 2016 low as it dipped below 1.6 percent. It was last at 1.7361 percent.

Gold prices also traded above $1,500 for the first time since 2013 on Wednesday. On Thursday afternoon, spot gold traded largely flat at $1,500.424.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.540 after seeing lows below 97.5 yesterday.

The Japanese yen traded at 106.18 against the dollar after touching levels below 106 in the previous session. The Australian dollar was at $0.6773 after rising from lows below $0.6720 yesterday.

Oil prices jumped in the afternoon of Asian trading hours on Thursday after seeing sharp declines the previous day. The international benchmark Brent crude futures contract rose 2.7 percent to $57.75 per barrel while U.S crude futures advanced 2.94 percent to $52.59 per barrel.

Source: Reuters