July 19, 2018 / 4:04 PM / 9 months ago

FOREX-Dollar advances to 1-year high; Chinese yuan weakens

    * Expectations for interest rate widening supports dollar
    * Yuan slides to one-year low vs dollar
    * PBOC to channel credit to small and medium-sized firms
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Recasts, adds new comment, U.S. data, FX table; updates
prices, changes byline, dateline; previous LONDON)
    By James Thorne
    New York, July 19 (Reuters) - The dollar rose to a one-year
high against a basket of currencies on Thursday, gaining for a
third straight session, as investors further boosted long-term
bets on the currency following bullish comments this week on the
U.S. economy by Federal Reserve Chairman Jerome Powell.
    The greenback also climbed to a one-year peak against the
yuan, as trade worries and reports Beijing would boost liquidity
in the financial system pressured the Chinese currency.
    The People's Bank of China is channeling credit to small and
medium-sized firms as the country looks set to loosen monetary
conditions to lessen the impact of a U.S.-China trade war.

    Easier monetary policy tends to weaken a currency. 
    In late morning trading, the dollar index, a gauge of its
value against a basket of six major currencies, was up
0.37 percent to 95.432, after touching a one-year high at
    The dollar was up as lower-than-expected jobless claims
bolstered rate hike expectations after two days of upbeat
comments on the U.S. economy by the Federal Reserve's chairman.
    On Tuesday and Wednesday, Powell said in congressional
testimony he believed the United States was on course for years
more of steady growth, and he carefully played down the risks to
the U.S. economy of an escalating trade conflict.
    The widening interest rate gap between the United States and
other major markets has lifted the dollar and prompted analysts
to expect further strengthening.
    "If you look at the U.S., we're just outpacing everyone in
terms of rate hikes," said Minh Trang, senior FX trader, Silicon
Valley Bank in Santa Clara, California.
    "That's going to help the dollar long term, and it has
helped the dollar in the short term as well, obviously."
    The dollar gained against the euro, with the single
currency sinking 0.3 percent to $1.1600. Against the Japanese
yen, the dollar rose 0.1 percent to 112.94 yen.
    The Chinese yuan fell 0.8 percent to 6.798 yuan
per dollar in offshore trading.
    China's Ministry of Commerce said on Wednesday it would have
to take further measures to compensate for losses caused by U.S.
tariffs on steel and aluminum 
    U.S. President Donald Trump's top economic adviser, Larry
Kudlow, said on Wednesday he believed Chinese President Xi
Jinping has blocked progress on a trade deal. China called
Kudlow's assertions "shocking" and "bogus" on Thursday.

    So far this year, the yuan has weakened roughly 4.4 percent
versus the U.S. dollar.
    Currency bid prices at 11:15AM (1515 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.1608        $1.1638     -0.26%         -3.23%      +1.1657     +1.1575
 Dollar/Yen       JPY=        112.9100       112.8300    +0.07%         +0.21%      +113.1600   +112.6600
 Euro/Yen         EURJPY=     131.08         131.32      -0.18%         -3.03%      +131.4200   +130.9200
 Dollar/Swiss     CHF=        1.0014         0.9987      +0.27%         +2.78%      +1.0043     +0.9982
 Sterling/Dollar  GBP=        1.2994         1.3068      -0.57%         -3.83%      +1.3083     +1.2959
 Dollar/Canadian  CAD=        1.3254         1.3169      +0.65%         +5.38%      +1.3271     +1.3160
 Australian/Doll  AUD=        0.7335         0.7397      -0.84%         -5.97%      +0.7441     +0.7324
 Euro/Swiss       EURCHF=     1.1625         1.1625      +0.00%         -0.55%      +1.1640     +1.1614
 Euro/Sterling    EURGBP=     0.8931         0.8903      +0.31%         +0.54%      +0.8942     +0.8902
 NZ               NZD=        0.6722         0.6792      -1.03%         -5.14%      +0.6805     +0.6717
 Dollar/Norway    NOK=        8.2459         8.1688      +0.94%         +0.47%      +8.2743     +8.1629
 Euro/Norway      EURNOK=     9.5738         9.5075      +0.70%         -2.79%      +9.5892     +9.5073
 Dollar/Sweden    SEK=        8.9316         8.8648      +0.51%         +8.90%      +8.9549     +8.8513
 Euro/Sweden      EURSEK=     10.3710        10.3180     +0.51%         +5.41%      +10.3811    +10.3138
 (Reporting by James Thorne; Additional reporting by Tom Finn in
London; Editing by Steve Orlofsky)
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