Investing.com – The Chinese Yuan dropped further on Wednesday after reaching a 13-month low on in the previous session. The International Monetary Fund (IMF) said on Tuesday that there is no evidence the Chinese authorities intervened the exchange rate of the Chinese currency.
Mury Obstfeld, the chief economist of IMF, said, “They [the Chinese government] haven’t been intervening in their foreign exchange market as far as we can see.”
He said other factors in the Chinese economy are piling pressure on the yuan, including lower growth, lower interest rates and the trade tensions with the U.S.
IMF’s comment came after the U.S. President Donald Trump accused China and the European Union of manipulating their currencies last Friday in a tweet. China responded on Monday that the government does not intend to devalue the currency to boost exports amid the US-China trade war.
The USD/CNY pair rose 0.17% to 6.8029 at 10:36PM ET (02:36 GMT), despite China’s recent injection of $74 billion of Medium-Term Lending Facility credit into the PBOC.
On Monday, China also announced a variety of measures to reinvigorate its economic growth, including a $10 billion tax cut, a $199 billion spending on infrastructure and $20.57 billion loans to about 150,000 small and micro firms each year.
The country’s economy grew by 6.7% in the second quarter, marking the slowest rate of growth in almost two years.
Meanwhile, the U.S. dollar index futures for September delivery rose 0.02% to $94.41, while the Japanese yen depreciates at 111.29 per dollar as the USD/JPY pair rose 0.09%.
U.S. President Donald Trump and European Commission President Jean-Claude Juncker are due to meet in Washington for trade-focused talks on Wednesday.
"If there is a further escalation of the trade issue, that could potentially hurt the risk sentiment and put pressures on the dollar/yen," said Shinichiro Kadota, senior FX & rates strategist at Barclays.
Elsewhere, the AUD/USD pair was 0.1% lower at 0.7412 after China said it would pursue a more “vigorous” fiscal policy.