Morning Commentary: Market tone weak as yuan drops again; Argentine peso down; Posco eyes deal

By Rebecca Melvin

New York, June 28 – A negative tone in emerging markets credit persisted on Thursday in generally thin trading as another drop in the value of the Chinese yuan against the U.S. dollar and other currency weakness promoted a risk-off tone, according to market sources.

The People’s Bank of China set the dollar’s reference rate at 6.596 yuan, 0.6% lower than on Wednesday, and putting it down 1.8% against the dollar this week. For the year, the yuan is 1.6% lower against the dollar.

The move supports a premise argued by some analysts that China could use currency devaluation to combat U.S. tariffs on its Chinese imports.

The Argentina peso was down another 1% on Thursday to 27.74 to the U.S. dollar, but the Brazilian real and South African rand, which weakened sharply on Wednesday, were flat to down only 0.1%. The real was 3.86 to the dollar last and the rand was 13.84.

Liquidity was generally light as the summer holiday period has kicked in, and there was little primary market activity. Although South Korean steelmaker Pohang Iron and Steel Co. (Posco) announced that it has mandated banks and scheduled a roadshow for a dollar-denominated issue of notes.

BofA Merrill Lynch, BNP Paribas, HSBC and Standard Chartered Bank will arrange the series of fixed-income investor meetings beginning July 9 for the Rule 144A and Regulation S notes.

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