The British pound early Wednesday in New York touched its weakest level against the U.S. dollar in about a year as Brexit worries buffeted the currency. Meanwhile, trade data from China offered some signs of the second-largest economy’s tariff spat with the U.S.
The U.S. dollar, meanwhile, reversed a slight gain versus its major rivals as Wednesday’s session continued, with the ICE U.S. Dollar Index
DXY, +0.03%
down 0.1% at 95.092.
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Still, the British pound
GBPUSD, -0.0699%
dropped to a level not seen since August last year on Wednesday as fears over the U.K.’s exit from the European Union, or Brexit, pressured the currency and its economic outlook, with pound weakness elevating domestic inflation. Sterling last bought $1.2887, down from $1.2938 late Tuesday in New York. The next key target level for the currency would be around $1.2775 to $1.2800, technical analyst said.
Comments from the U.K. trade minister, Liam Fox, over the weekend sparked some of the early worries, after the official put the chance of a so-called hard Brexit at 60%, with no plan outlining the future relationship between the kingdom and the EU. Those remarks helped to push the pound to an 11-month nadir to start the week. So far this week, the pound is down more than 1% against the U.S. dollar.
Elsewhere, investors focused on China’s July trade numbers, which showed a falling trade surplus at $28.05 billion—less than expected. The data also showed a surge in imports last month, which can be attributed to a desire to replenish stocks ahead of further weakness in the yuan or tariffs, rising energy demand due to hot weather that increased coal and oil imports and higher aluminum imports as a function of the weaker Chinese currency, said Marc Ostwald, global strategist and chief economist at ADM Investor Services International.
“But overall this will do little to assuage concerns about the escalating trade tensions with the U.S., or the outlook for the Chinese economy, with the modest narrowing of the trade surplus with the U.S. from June’s record hardly indicative of a trend turn,” Ostwald added.
The dollar strengthened somewhat against China’s yuan, buying 6.8357 yuan onshore in Beijing
USDCNY, -0.0161%
up less than 0.1%, and 6.8253 yuan in the more freely traded offshore market
USDCNH, +0.0147%
also up less than 0.1%.
President Donald Trump announced another round of 25% tariffs on $16 billion of Chinese imports starting in two weeks, and Beijing is expected to retaliate.
Also in Asia, minutes from the Bank of Japan’s last policy meeting showed how divided the bank’s policy makers are in terms of how to proceed with its ultraloose monetary policy, which bears some risks to its financial system.
While this was by no means a hawkish turn for the BOJ’s position, it propelled the yen
USDJPY, -0.12%
higher, as traders had been hoping for news of the near-term end of easy-money policies. The greenback last fetched ¥110.99, down from ¥111.38, making the yen one of the best performing G-10 currencies on Wednesday.
The BOJ is one of the few central banks of a developed economy with an accommodative monetary policy at full strength nearly a decade after the financial crisis.
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Source : MTV
