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Yuan Edges Down; Huawei’s Legal Action Against U.S. in Focus

5/29/2019, 3:07:14 PMMarket Analysis
Yuan Edges Down; Huawei’s Legal Action Against U.S. in Focus

The Chinese yuan edged down against the U.S. dollar on Wednesday in Asia following reports that Huawei filed new legal action against Washington.

The USD/CNY pair rose 0.1% to 6.9132 by 11:30 PM ET (03:30 GMT).

Huawei filed a lawsuit against the U.S. government and challenged the constitutionality of a U.S. law banning federal agencies from buying its products.

Banning Huawei using cybersecurity as an excuse “will do nothing to make networks more secure. They provide a false sense of security, and distract attention from the real challenges we face,” said Song Liuping, Huawei’s chief legal officer.

“Politicians in the U.S. are using the strength of an entire nation to come after a private company,” Song noted. “This is not normal. Almost never seen in history.”

The news came in the wake of escalating U.S.-China tensions after Trump hiked tariffs on $200 billion of Chinese goods from 10% to 25%.

Beijing hit back by raising tariffs on $60 billion worth of American products.

Fears of a prolonged U.S.-China trade war heightened this week after Trump said the U.S. was "not ready" to make a trade deal.

“They would like to make a deal. We’re not ready to make a deal,” said Trump.

In other news, China's central bank said it will inject CNY 270 billion ($39.09 billion) through seven-day reverse bond repurchase agreements on Wednesday, according to Reuters.

The amount of daily net cash injection via reverse repo operations is the biggest since Jan.17, 2019, the report said. The PBOC has injected a net 400 billion yuan so far this week.

Meanwhile, Trump and his administration again refrained from labelling China a currency manipulator, according to a report released on Tuesday.

The report was officially due in mid-April but was delayed partly due to the changes to the criteria used to evaluate countries, a senior Treasury official told reporters Tuesday.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies was little changed at 97.805.

The dollar received some support overnight after the Conference Board’s consumer confidence index for May rose to 134.1 from 129.2 in April.

The NZD/USD pair edged up 0.1% to 0.6544.

New Zealand business sentiment survey showed a net 32% of respondents expected the economy to worsen. That compared with a 37.5% pessimism level in the previous poll in April.

The AUD/USD pair also rose 0.1% to 0.6929.