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The DoJ subpoena means problems are mounting up for Glencore.
Bloomberg’s Thomas Biesheuvel explains:
It’s been a tumultuous year for Glencore, mostly due to challenges linked to its business in the Congo, where it operates giant copper and cobalt mines. The Swiss company trader and miner is already facing the possibility of a bribery investigation by U.K. prosecutors over its work with Dan Gertler, an Israeli billionaire and close friend of Congo President Joseph Kabila, people familiar with the situation said in May.
Wow. Around £5bn has been wiped off Glencore’s value by today’s selloff.
Newsflash: The world’s biggest commodity trading firm is being investigated by the US authorities.
Glencore Ltd, a subsidiary of Glencore plc, has received a subpoena dated 2 July, 2018 from the US Department of Justice to produce documents and other records with respect to compliance with the Foreign Corrupt Practices Act and United States money laundering statutes. The requested documents relate to the Glencore Group’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present.
Glencore is reviewing the subpoena and will provide further information in due course as appropriate.
China’s top central banker has blamed America for the yuan’s weakness.
In a statement, Yi Gang, governor of the People’s Bank of China (PBOC), says:
“Recently, there have been some fluctuations in the foreign exchange market. We are paying close attention to this,
“This is mainly due to factors such as the strengthening of the U.S. dollar and external uncertainties.”
* VIETNAM DONG DROPS TO RECORD LOW, HITS 23,000 PER USD IN BANKS
The People’s Bank of China has launched an attempt to reassure Chinese investors and prevent the yuan falling further.
In a statement released a few minutes ago, PBOC says it is “closely watching” moves in the foreign exchange markets.
#CHINA TO KEEP YUAN STABLE AT EQUILIBRIUM LEVEL: PBOC GOVERNOR
*YI: RECENT FX MKT VOLATILITY DUE TO USD STRENGTH, UNCERTAINTIES
*PBOC’S YI REITERATES PRUDENT, NEUTRAL MONETARY POLICY
Reuters: #China‘s offshore yuan pares losses, trading at 6.6900 per dollar as of 0703 GMT (following jawboning by PBOC chief Yi Gang)
ING’s China economist Iris Pang also blames Trump’s tariffs for causing the yuan’s decline, saying:
“Today’s depreciation is market-driven, reflecting the risks of a trade war.
This implies that the central bank is allowing market forces to dictate the speed of the depreciation when there is room to do so.”
Chinese banks scrambled to prop up the yuan after it fell through the 6.7 level against the US dollar this morning.
Chinese banks were seen selling dollars after the yuan weakened past a key level, stoking speculation that authorities were seeking to slow the losses.
The yuan was 0.5% lower at 6.6981 per dollar at 11:31 a.m. in Shanghai after earlier falling to 6.7204. Some Chinese major banks sold the dollar in the swaps market, according to four traders.
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Chinese yuan slides to fresh 11-month low. Onshore yuan as low as 6.7168/$, offshore yuan 6.7326/$. Spread between offshore and onshore yuan continues to widen – briefly widest since Feb – reflecting mounting selling pressure from international investors. pic.twitter.com/NLnIqfuG8V
In August 2015, USD-CNY appreciated from 6.21 to 6.44, a two-day gain of 3.85%. As a result, global stock markets sold off sharply as investors feared the beginning of a currency war. With trade tensions increasing day by day, Beijing might be playing this game as a tool in its trade war with the U.S. However, such a strategy will be a double-edged sword as it might also lead to a flight of capital which the PBoC is well aware of.
Although the Chinese currency depreciated 3.23% in June, it didn’t sound quite so alarming, given that the Dollar appreciated against most major currencies in May and June. Going forward it’s going to be about the pace and magnitude of the currency moves that will drive equity markets. CNYUSD traded at 6.70 at the time of writing and will keep a close eye on 6.96, the lowest level reached in January 2017.