Currency war fears ease; oil hits six-year low

Thu Aug 13, 2015 6:39pm EDT
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By David Gaffen

NEW YORK (Reuters) - Bond yields rose in major markets on Thursday after China's central bank reassured investors there was no reason for its currency to keep falling, but oil prices fell to six-year lows on supply concerns.

Despite the renewed calm in markets, the yuan weakened for a third day and some forecast further declines in the face of a weak economy, even as People's Bank of China Vice-Governor Yi Gang dismissed talk of a deeper devaluation.

"They're taking the Chinese central bank at its word, but I'm still taking those comments with a pinch of salt," said Hantec Markets analyst Richard Perry.

The PBOC set its guidance rate CNY=SAEC at 6.4010 per U.S. dollar prior to the market opening, weaker than the previous fix of 6.3306. The gap between the guidance rate and the traded spot market rate narrowed sharply as banking sources said the PBOC had stepped up intervention to stabilize prices. It was lately traded at 6.3982.

Traders remained cautious. Sources had told Reuters this week some powerful voices in the government were pushing for an even deeper yuan devaluation to help China's struggling exporters.

Oil prices neared their nadir for 2015 after refinery outages and data showing inventory builds revived concerns about oversupply.

U.S. crude CLc1 settled down $1.07 at $42.23 a barrel, after setting a session bottom at $41.91, its lowest since March 2009 when the financial crisis was wreaking havoc on oil prices. Brent crude LCOc1 slipped 1.1 percent to $49.13.

Investor fears of a currency war or substantial asset depreciation eased, but U.S. equities were hit by weak energy prices, dragging shares of those companies lower.   Continued...

Traders gather for the IPO of Houlihan Lokey, Inc., on the floor of the New York Stock Exchange August 13, 2015. REUTERS/Brendan McDermid