SHANGHAI (Reuters) – Chinese stocks dipped early on Monday, handing back some of their hard-won gains from late last week as a deadline loomed for fresh tariffs in the trade dispute between China and the United States.
The yuan CNY=CFXS, fresh off its worst month on record, continued to lose ground against the dollar, trading at around 6.6320 at 0230 GMT from a close of 6.6225 on Friday.
Tension is growing ahead of a July 6 deadline when the United States is due to impose $34 billion of tariffs on Chinese exports. Beijing is expected to respond with tariffs of its own on U.S. goods.
On Friday, Chinese stocks and the yuan bounced with benchmark share indexes having one of their best days since mid-2016.
Still, June represented the worst month for Chinese stocks in more than two years and the yuan’s biggest monthly fall on record.
By 0240 GMT on Monday, the benchmark CSI300 index .CSI300 had fallen nearly 1 percent, while the Shanghai Composite Index .SSEC was down by about 0.75 percent. Financial stocks led declines, with the CSI financial sub-index .CSI300FS down about 1.7 percent.
Hong Kong’s markets were closed on Monday for a public holiday.
The yuan fell 3.25 percent against the dollar in June.
On Friday, the last trading day of the month, ING lowered its yuan forecast to 7 per dollar by the end of the year from a previous forecast of 6.6, citing risks to the policy outlook.
“A weaker currency would, at most, be a shield, safeguarding wider damage from a trade war and the hurdles faced by Chinese companies’ operating in U.S.,” it said. ING added it did not see any panic in the market.
ING’s shift follows a similar move on June 24 by Deutsche Bank, which said it expected the yuan to depreciate to 6.8 per dollar by the end of this year and 7.2 by the end of 2019. It had previously forecast 6.4 yuan per dollar in each year.
The depreciation will be “driven by an important change of policy stance from tightening to loosening”, it said.
Reporting by John Ruwitch and Winni Zhou; Editing by Sam Holmes
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