Yuan declines after US dollar rallies on Trump’s tax pledge

The Chinese yuan weakened against the US dollar in both onshore and offshore markets on Friday morning, after the US dollar rallied on a tax pledge from US President Donald Trump.

The greenback also rose sharply against the Japanese yen before a highly-anticipated Trump-Abe meeting later in the day.

The spot yuan added to previous losses and dropped 0.13 per cent to 6.878 per US dollar as of 12.20am.

The offshore yuan also looked possible to extend a four-day losing streak and dipped 0.02 per cent to 6.8653 per US dollar.

Earlier in the day, the People’s Bank of China lowered the yuan’s daily guidance rate by 0.16 per cent or 109 basis points, setting its mid-point rate at 6.8819 per US dollar.

On Thursday, the ICE US Dollar index rallied after Trump said there will be a “phenomenal ” tax plan coming out in two or three weeks, but didn’t offer details. White House spokesman Sean Spicer later said the plan includes tax cuts for both individuals and businesses.

“The long-awaited tax reforms plans appear to be seeing some light, and it is no surprise to see the markets cheering,” said Jingyi Pan, a strategist for IG Group.

The US dollar also rose sharply against the Japanese yen, as traders looked ahead to a meeting between US President Trump and Japanese Prime Minister Shinzo Abe at the White House later on Friday.

The dollar traded at ¥113.73, up 0.4 per cent or 48 basis points from late Thursday.

Last month, Trump accused Japan and China of “playing the devaluation market” to gain a trade advantage against the US.

The euro traded at US$1.0661, up 0.06 per cent from 1.0655 in the prior session. The British pound was at US$1.2508, higher by 0.09 per cent from 1.2497.