Commodities & Futures

China’s renminbi strengthened to a five-month high after the US Treasury department removed the label of the country as a currency manipulator, ahead of the signing this week of a “phase one” trade deal between the two sides.

The Trump administration designated China a currency manipulator in August after the Chinese central bank allowed the renminbi to weaken beyond Rmb7 to the dollar.

Lifting that label on Monday, Steven Mnuchin, US Treasury secretary, said China had “made enforceable– commitments to refrain from competitive devaluation” and pointed to the imminent broader agreement on trade.

The onshore renminbi, which trades 2 per cent either side of a daily midpoint set by the People’s Bank of China, was 0.2 per cent stronger at Rmb6.8820 per dollar as markets opened in London on Tuesday morning, its highest level since July.

The offshore renminbi, which is less tightly controlled, was flat at Rmb6.8841 to the dollar.

As trade tensions eased, the Japanese yen, viewed as a haven in times of political uncertainty, weakened below ¥110 to the dollar for the first time since May last year.

But the more positive mood failed to sustain early gains for Chinese equities, with the CSI 300 index of Shanghai- and Shenzhen-listed stocks falling 0.3 per cent, a day after closing at a near-two-year high.

The renminbi has strengthened as the signing of the trade deal draws nearer, going some way to reversing its steady depreciation in 2019.

However, Robert Carnell, Asia-Pacific chief economist for ING, warned against getting “carried away” by the US Treasury’s decision.

“The political pressure for taking a tough line on trade will grow as we approach the US presidential election,” he said. “So it’s all smiles and [renminbi] appreciation now, but from the middle of the year, things may begin to look rather different.”

Liu He, China’s vice-premier, will sign the trade deal on Wednesday in Washington. The text is expected to include a chapter on currency that commits China to not engage in competitive devaluations.

Stock markets in Asia Pacific stalled after a strong start on the back of records on Wall Street, where the S&P 500 climbed 0.7 per cent and the Nasdaq Composite rose 1 per cent. US stock futures point to a 0.1 per cent slip when New York opens.

Hong Kong’s Hang Seng index briefly touched its highest point since before anti-government protests began in June, before giving up its gains to trade down 0.4 per cent. Japan’s Topix was up 0.3 per cent while South Korea’s Kospi gained 0.4 per cent.

Data showed that China’s dollar-denominated exports grew 7.6 per cent in December, after four consecutive months of declines. Imports jumped 16.3 per cent. But economists cautioned that the sharp increase reflected a low base and that domestic demand remained weak.

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Markets Briefing is a concise look at global markets, updated throughout the trading day by Financial Times journalists in Hong Kong, New York and London. Feedback? Write in the comments below or send us an email.

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