FOREX-Yuan gains as China appears to curb currency weakness

* Stronger yuan boosts risk appetite
* U.S. labels China a currency manipulator

(New throughout, updates trading and comments to U.S. market
open, new byline, changes dateline, previous LONDON)
By Karen Brettell
NEW YORK, Aug 6 (Reuters) - The Chinese yuan strengthened
and demand for safe haven currencies like the Japanese yen and
Swiss franc fell on Tuesday as China appeared to take steps to
stabilize its currency, after the yuan on Monday breached a key
level and sparked broad risk aversion.
Stocks and emerging market currencies plunged on Monday and
safe havens jumped after Chinese authorities allowed the yuan to
break through the psychologically important level of 7 per
dollar, its lowest level since the 2008 financial crisis.
Risk appetite improved on Tuesday after the People's Bank of
China fixed the daily reference rate for the onshore Chinese
yuan at 6.9683, firmer than the expected 6.9871, and below the
key 7 rate.
The central bank also said it was selling yuan-denominated
bills in Hong Kong, a move seen as curtailing short selling of
the currency. “The signs that China's not willing to let the cny continue
drifting above 7 is somewhat constructive from a cross asset
perspective,” said Bipan Rai, North American head of FX strategy
at CIBC Capital Markets in Toronto.
Onshore yuan CNY= stayed above 7 but gained 0.38% percent
to 7.0189 per dollar, after weakening as far as 7.0575
overnight.
The offshore yuan CNH= also gained 0.70% to 7.0482, down
from a high of 7.1397.
Escalating tensions between the United States and China are
likely to keep investors cautious with no end in sight to the
Sino-U.S. trade war.
The U.S. Treasury Department announced late on Monday that
it had determined for the first time since 1994 that China was
manipulating its currency and said that Washington would engage
the International Monetary Fund to clamp down on Beijing.
China's central bank responded on Tuesday that China "has
not used and will not use the exchange rate as a tool to deal
with trade disputes.”
It added that Washington's decision to label Beijing as a
currency manipulator would "severely damage international
financial order and cause chaos in financial markets."
“The fact that the Treasury has labeled China as a currency
manipulator, especially since this is an out of cycle move by
the U.S. Treasury, suggests that things are pretty antagonistic
between the U.S. and China and volatility should continue to
remain elevated into the near term," Rai said.
Chinese monetary authorities let the yuan slide past the 7
level so that markets could finally factor in concerns around
the Sino-U.S. trade war and weakening economic growth, three
people with knowledge of the discussions said on Monday.
Currency bid prices at 9:30AM (1330 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1173 $1.1202 -0.26% -2.58% +1.1249 +1.1172
Dollar/Yen JPY= 106.5100 105.9400 +0.54% -3.40% +107.0700 +105.5300
Euro/Yen EURJPY= 119.04 118.68 +0.30% -5.69% +119.8500 +118.3800
Dollar/Swiss CHF= 0.9778 0.9733 +0.46% -0.37% +0.9782 +0.9704
Sterling/Dollar GBP= 1.2166 1.2141 +0.21% -4.63% +1.2209 +1.2135
Dollar/Canadian CAD= 1.3226 1.3213 +0.10% -3.01% +1.3236 +1.3187
Australian/Doll AUD= 0.6786 0.6756 +0.44% -3.73% +0.6801 +0.6751
ar
Euro/Swiss EURCHF= 1.0927 1.0903 +0.22% -2.91% +1.0931 +1.0898
Euro/Sterling EURGBP= 0.9183 0.9223 -0.43% +2.22% +0.9249 +0.9172
NZ NZD= 0.6534 0.6526 +0.12% -2.72% +0.6585 +0.6510
Dollar/Dollar
Dollar/Norway NOK= 8.8997 8.9270 -0.31% +3.02% +8.9299 +8.8915
Euro/Norway EURNOK= 9.9456 10.0008 -0.55% +0.40% +10.0212 +9.9424
Dollar/Sweden SEK= 9.5922 9.6018 -0.37% +7.01% +9.6095 +9.5698
Euro/Sweden EURSEK= 10.7198 10.7598 -0.37% +4.44% +10.7683 +10.7180