Dow futures rose Tuesday morning, after China took steps to ease the budding currency war with the United States.
China priced the yuan’s reference rate at 6.9683 to the dollar, a hair above the target 7:1 ratio to the US dollar. Although that was the weakest level for the yuan in 11 years, many Wall Street investors feared China would price the yuan below that psychological 7:1 barrier.
The yuan, which trades more freely outside China, continued to fall below the barrier on the open market (to 7.07 to the dollar), but investors were still encouraged that the damage wasn’t considerably worse.
Look for bitcoin value to jump to $15,000 after China devalues currency, analyst says
Stock futures also got a boost after the Chinese central bank announced plans to issue central bank bills worth 30 billion yuan next week. That supported China’s currency, which bounced back slightly against the dollar after the announcement.
Futures erased an earlier 600-point plunge. Stock futures initially tumbled Monday evening after the United States labeled China a currency manipulator.
Investors feared the label would eliminate China’s incentive to keep the yuan above the 7:1 ratio to the dollar, setting off a currency war with the United States. A further devaluation of the yuan could ease the burden of America’s tariffs on China. Wall Street fears a steep drop in the yuan could escalate the trade war, prompting the United States to raise its tariffs on China.
Dow futures were 75 points higher. The S&P 500 futures rose 0.8% and Nasdaq futures were up 0.9%.
Tech stocks tumble as US-China trade dispute moves toward currency war
US stocks posted their worst day of 2019 on Monday, with the Dow plunging 767 points. The Nasdaq was the worst hit, because tech stocks would be hit particularly hard by an escalation in the trade war.
European stocks recovered somewhat Tuesday, and Asian stocks closed a bit lower.
