China's yuan weakens for second day on firmer dollar, Trump trade fears
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100 Yuan notes are seen in this illustration picture in Beijing November 5, 2013. REUTERS/Jason Lee
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HONG KONG (Reuters) - China's yuan weakened for a second straight day on Friday and traders braced for further depreciation amid rising uncertainty about U.S. policies, particularly on trade with China, under President-elect Donald Trump.
Trump's surprise victory in elections this week has fueled worries in Asia's trade-reliant economies that he may follow through on some of his protectionist rhetoric such as imposing punitive tariffs, with China seen as the most vulnerable in the region.
The U.S. has the biggest trade deficit with China.
In addition, expectations of higher interest rates during Trump's term have buoyed the dollar against other currencies.
"The PBOC is caught between a rock and a hard place in the face of a strong U.S. dollar and huge waves of capital outflows," said Stephen Innes, senior trader at OANDA.
"I suspect if, or when, any global trade policies are implemented, they would be executed in a very controlled fashion to have limited impact on the global economy.
The People's Bank of China set the midpoint rate
The spot market
The Thomson Reuters/HKEX Global CNH index <.RXYH>, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.95, firmer than the previous day's 94.7.
The global dollar index <.DXY> fell to 98.665 from the previous close of 98.785.
The offshore yuan was trading -0.27 percent away from the onshore spot at 6.83 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs)
One-year NDFs are settled against the midpoint, not the spot rate.
(Reporting by Saikat Chatterjee; Editing by Kim Coghill)
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