US Treasury Secretary denies any chance or a currency war

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Meanwhile, the People's Bank of China injected 502 billion yuan into its market through a medium-term lending facility, giving Chinese lenders greater liquidity by letting them borrow from the central bank. The greenback against a basket of currencies trades 0.1 percent down at 94.43, having touched a low of 94.21 earlier, its lowest since July 11.

"It's probably a little too early for the indirect impact of the U.S".

Economic growth slowed slightly to 6.7 percent in the second quarter as Beijing's efforts to contain debt hurt activity, while June factory output growth weakened to a two-year low, in a worrying sign for investment and exporters as a trade war with the United States intensified. The offshore yuan CNH=D3 fell almost 0.6 percent to a low of 6.8448 per dollar, its weakest since June 2017. "Merkel and European Union officials joined China in stating that they would resist and retaliate against U.S. tariffs". "If it's a tariff-only story, then for the time being it's still dollar-positive", because China and the euro region have more to lose than the U.S.in such an environment.

As investors sold bonds, the country's stock markets moved higher on the prospect of policy easing.

"If anything, the incentive will be to tighten more, not less, because of this political pressure", Perli said in a note Friday.

"China has a large, growing population that will consume more products" and that likes American products, he said, while cautioning that US companies shouldn't be pressured to share their technology.

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The kiwi traded at 4.6068 Chinese yuan from 4.6053 yuan yesterday.

Meanwhile, the Aussie and Kiwi Dollars also benefited from weaker U.S. Dollar where both rose against their U.S. counterpart to finish the session in the green at 0.7415 AUDUSD and 0.6807 NZDUSD respectively.

China operates a managed floating exchange rate. It was trading at 6.8265 as of 0200 GMT.

In the eurozone, Frankfurt's DAX 30 jumped 1.4 percent and the Paris CAC 40 won 0.9 percent.

Gold prices declined as the greenback rebounded from near 2-week lows, as markets continued to price in a strong, steady rate hike path for the US Federal Reserve.

China said on Monday the value of its currency is driven by market forces and that it has no intention to devalue the yuan to help exports, after Washington said it was monitoring the currency's weakness amid the escalating bilateral trade row. "Ahead of the BOJ's policy meeting next week, the dollar/yen is likely to test lower", said Shuntaro Ikeshima, chief manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking Corp.

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