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FOREX-Offshore Chinese yuan pares back gains as enthusiasm from tariffs delay wanes
Published at 14/08/2019 at 08:49

* Chinese yuan weak after one-week jump the day before

* Japanese yen retraces losses to trade higher

* Graphic: World FX rates in 2019

By Olga Cotaga

LONDON, Aug 14 (Reuters) - The offshore Chinese yuan offloaded on Wednesday the gains it made the day before on the back of the announcement that the United States will delay the recently announced tariffs on Chinese imports until later this year.

The fall in the yuan mirrored analysts' views that the delay in tariffs, although a positive step, wasn't even close to resolving the US-China trade war. A strengthening of the Japanese yen on Wednesday also reinforced these views and showed that risk appetite hasn't fully made a comeback to the financial markets.

Weaker-than-expected Chinese economic data contributed to yuan falls. China's closely watched industrial output rose in July at the slowest pace in more than 17 years.

"The lack of visibility on trade war outlook means that yesterday’s price action (rise in yuan, fall in yen) is unlikely to translate into a long-lasting trend," said ING analysts in a note to clients. "One should not get carried away," they said.

The offshore yuan jumped to a one-week high against the dollar on Tuesday after U.S. President Donald Trump backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods. The announcement was made following renewed trade discussions between U.S. and Chinese officials.

On Wednesday, however, the yuan was down by 0.4% versus the greenback at 7.0360 , staying below the psychological level it breached last week when the 10% tariffs were announced. On Wednesday, China had fixed the onshore yuan at 7.03, "the only sign so far of China making any concessions" to the United States, said Esther Reichelt, an analyst at Commerzbank.

The Japanese yen was last up by 0.4% against the dollar at 106.33 , having reached a one-week low the day prior to that.

"The mid-term trend is for yen gains, because the United States has not changed its tough stance on China," said Shuntaro Ikeshima, chief manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking Co.

"There was a lot of short-covering overnight, but in Asia the market quickly ran into real demand to buy yen. Once you added the Chinese data, this managed to keep the yen firm."

Elsewhere in the foreign exchange market, major currencies were little changed Wednesday morning.

The euro was flat at $1.1180 despite weaker second-quarter German gross domestic product data as the quarter-on-quarter contraction was largely expected. Moreover, the year-on-year figure was higher than economists polled by Reuters predicted.

Traders are waiting for the first estimate of eurozone GDP data, due at 0900 GMT. A Reuters poll forecasts that second-quarter GDP growth remained unchanged at 0.2% quarter-on-quarter and at 1.1% year-on-year.

Sterling was also steady, last flat at $1.2056 , and little changed against the euro at 92.73 pence . However, current levels suggest investors aren't willing to take the pound away from the multi-year lows it reached last week.

Traders are also awaiting inflation data in the UK at 0830 GMT, which is expected to decline slightly in July to 1.9% year-on-year from the 2% seen in June.

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(Reporting by Olga Cotaga Additional reporting by Stanley White Editing by Peter Graff)