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FOREX-Yen rises, yuan falls after Trump signs Hong Kong protest bill

Published 28/11/2019, 11:35 am
FOREX-Yen rises, yuan falls after Trump signs Hong Kong protest bill
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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Worries about U.S.-China relations boost safe havens

* Hong Kong human rights bill could hamper trade war

* U.S. economic data to limit dollar's downside

By Stanley White

TOKYO, Nov 28 (Reuters) - The safe-haven yen rose against the dollar after U.S. President Donald Trump signed into law legislation supporting anti-government protesters in Hong Kong, which could complicate efforts to end the U.S.-China trade war.

The yuan fell in offshore trade as scrutiny of Hong Kong's response to months of often violent protest against Chinese rule of the former British colony potentially opens up a new fault line in already fractious relations between Washington and Beijing.

The Swiss franc and gold also rose on Thursday as investors sought safe-haven assets due to concern about a potential increase in geopolitical risk.

The focus now shifts to China's reaction as investors try to gauge how much impact U.S. support of anti-government protests in Hong Kong will have on negotiations to scale back a 16-month long trade war between the world's two-largest economies.

"The yen is being bought because of the news about Trump signing the Hong Kong bill," said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

"Algorithmic trading could push the yen up further, but the dollar's losses will be limited because we've had positive U.S. economic data, which has lifted sentiment."

The yen JPY=EBS rose around 0.2% to 109.35 versus the dollar on Thursday in Asia, rebounding from a six-month low reached Wednesday after U.S. economic growth was revised up in the third quarter. the offshore market, the yuan CNH=D3 fell 0.19% to 7.0290 per dollar.

Trump on Wednesday signed a bill that requires the State Department to certify, at least annually, that Hong Kong retains enough autonomy to justify favourable U.S. trading terms which have helped it maintain its position as a global financial hub.

The law also threatens sanctions for human rights violations in Hong Kong, which has been rocked by months of civil unrest in response to what protesters say is an erosion of freedoms since reverting to Chinese rule in 1997. has denied any undue influence and has blamed foreign governments for meddling it Hong Kong's affairs.

Many see the U.S. legislation as symbolic, but it has the potential, if implemented, to upend relations between the United States and Hong Kong and change the territory's status to that of any other Chinese city.

The U.S. rebuke comes at a sensitive time because U.S. and Chinese negotiators are trying to reach an agreement to de-escalate a trade war, which would remove a huge headwind from the global economic outlook.

Washington and Beijing have imposed tariffs on each other's goods in a prolonged dispute over Chinese trade practices that the U.S. government says is unfair.

Investor uncertainty benefited the Swiss franc CHF=EBS , which pulled back from a two-month low to trade at 0.99875 against the greenback.

Gold XAU= , another safe haven bought in times of uncertainty, rose 0.13% to $1,456.15 per ounce.

The rise in safe havens undermined the dollar, which came into Asian trade on a high after revised data showed U.S. economic growth picked up slightly in the third quarter. data showed new orders for key U.S.-made capital goods increased by the most in nine months in October and shipments rebounded.

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