FOREX-China's yuan slumps to 2019 low as trade war escalates

* Yuan headed for sixth consecutive day of losses
* But most currencies little changed by trade war
* Risk aversion dominates FX
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tom Finn
LONDON, May 13 (Reuters) - China's yuan was set for its
worst daily fall in nine months on Monday as trade negotiations
between the U.S. and China ended after President Donald Trump
raised tariffs on Chinese goods.
Currency moves in response to the latest trade hostilities
have been muted, but on Monday the yuan fell 0.8% to 6.9040, its
weakest since Dec. 27 CNH=EBS . Some analysts say it may breach
7 per dollar in coming months, a level last seen during the
global financial crisis.
China would probably use its vast currency reserves to stop
any plunge through 7 to the dollar, which could trigger
speculation and heavy capital outflows.
Investors bid up the yen, which is considered a safe haven
in times of stress given Japan's status as the world's largest
creditor and its huge hoard of assets abroad.
The yen was 0.25% higher at 109.700 yen JPY=EBS , near last
week's three-month high of 109.470.
"We're waiting to see if China retaliates to the latest
round of U.S. tariffs ... and continue to favour the yen on a
short-term basis and expect the market to remain focused on the
yuan," said Chris Turner, an ING currency strategist.
The world's two biggest economies appeared deadlocked on
Sunday. Washington demands changes to Chinese law; Beijing says
it won't swallow any "bitter fruit" that harms its
interests. President Trump and his Chinese counterpart Xi Jinping are
likely to meet during a G20 summit in Japan at the end of June
and discuss trade.
The Australian dollar shed 0.3% to $0.6976 AUD=D4 . A drop
below $0.6960 would take the currency, already burdened by a
dovish shift by the Reserve Bank of Australia, to its lowest
since early January.
The Aussie is sensitive to shifts in risk sentiment and also
serves as a proxy for trades related to China, Australia's
largest trading partner.
The dollar index against a basket of six major currencies
was flat at 97.318 .DXY .

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