China buys struggling Yuan as US dollar, pound sterling rise
ALBAWABA – With China selling United States (US) dollars during London and New York trading hours to bolster its faltering Yuan, the US dollar rose on Thursday against the Japanese Yen and Australian dollar, news agencies reported.
Meanwhile, the United Kingdom’s (UK) Pound Sterling rose Thursday off the back of official data showing headline UK inflation down to a 15-month low in July, according to Agence France-Presse (AFP).
The sterling, however, dipped slightly afterwards, by 0.1%, stabilizing eventually at $1.2720.
On the Pacific front, the US dollar pushed the yen deeper into intervention territory on Thursday as US economic data showed the need to keep interest rates up for longer and perhaps hike them some more.
The yen weakened to 146.565 per dollar, its lowest level since November, having come under renewed pressure as a result of interest rate differentials between the US and Japan's ultra-low rate. It last bought 146.37 per dollar, according to Reuters.
Likewise, against a stronger gThe reenback, the Euro fell to a six-week low at $1.0862.
The Bank of Japan’s objectives behind its ultra-low rate is to encourage borrowing, drive growth and crank up inflation, contrary to the rest of the world.
But the "sharp rise in dollar/yen definitely has increased the risk that the Japanese authorities will have to step into the FX market again to support the yen," Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA), told Reuters.
On the other hand, the Australian dollar sank to a nine-month low, taking its New Zealand counterpart along with it, after data showed that Australia's employment unexpectedly fell in July, Reuters reported.
Data on Wednesday showed that U.S. single-family home building surged in July and permits for future construction rose, while a separate report revealed production at U.S. factories unexpectedly rebounded last month.
The US dollar index touched a two-month high of 103.59.
In the meantime, the offshore yuan hit a fresh nine-month low of 7.3490 per dollar, while its onshore counterpart similarly weakened to a nine-month trough of 7.3174 per dollar.
To shore up the Yuan, China's major state-owned banks sold US dollars for yuan in onshore and offshore foreign exchange markets this week during London and New York trading hours, according to Reuters.
