* No progress at deputy-level trade talks -SCMP
* Yen, franc and euro rise
* Yuan drops to one-month low
By Tom Westbrook
SINGAPORE, Oct 10 (Reuters) - The yen rose and the yuan fell on
Thursday, after a news report said deputy-level trade talks between
Chinese and U.S. officials in Washington had failed to make much
headway, sending investors scurrying for safety.
The South China Morning Post, citing unnamed sources familiar with
the discussions, said no progress was made on key issues and China's
lead negotiator, Vice Premier Liu He, planned leaving Washington a day
The safe-havens of the yen and Swiss franc each rose as much
as 0.3% though some of the gains were soon retraced after CNBC said
the White House was unaware of any plans by the Chinese delegation to
The yen last stood at 107.35 per dollar and the franc at 0.9936
per dollar. The euro nudged higher to $1.0988.
China's yuan dropped 0.4% to hit five-week low in offshore trade,
before it too recovered.
The trade-sensitive Australian and New Zealand dollars hit
week lows before turning flat. Against a basket of currencies the
dollar fell 0.1% to 99.012.
The moves offered a preview of what to expect if the talks achieve
little or nothing, said Joe Capurso, senior currency strategist at the
Commonwealth Bank of Australia in Sydney.
"We don't see any easy route to an agreement so we can see
this going on for quite some time," he said.
Markets have for weeks gyrated as the likelihood of a breakthrough
at the talks has waxed and waned while signs of the toll that the
Sino-U.S. trade dispute is taking on the global economy have growth in
strength and number.
Optimism that some sort of partial agreement between the parties
could be reached had rallied risk assets overnight, before the SCMP
report quickly unwound most of the hopes.
"The markets still seem to be travelling with a glimmer of
optimism," said Ray Attrill, head of FX strategy at National
Australia Bank, with one possibility a deal that staves off U.S.
tariff rises in return for agricultural purchases by China.
"But as things stand that looks like a little bit naively
optimistic that that was going to be the result of this. We're back to
saying that chances are no trade deal."
Tensions had flared leading in to the deputy-level discussions
after U.S. imposed visa restrictions on Chinese officials and
blacklisted some Chinese tech firms it believes are implicated in the
poor treatment of Muslim minorities.
Surprised and upset by the blacklisting, China lowered
expectations for progress from the talks, Chinese government officials
The SCMP report cited a source saying the talks had so far skirted
some of the thorniest issues, including technology transfers and state
subsidies in China.
Liu, who is scheduled to meet U.S. Trade Representative Robert
Lighthizer and Treasury Secretary Steven Mnuchin later on Thursday, no
longer plans to remain in the U.S. capital for meetings on Friday, the
The Chinese yuan fell as far as 7.1677 per dollar, its weakest
since Sept. 4, before recovering in offshore trade.
The Australian dollar and New Zealand dollar
each fell 0.1% to touch one-week lows, but then steadied with the
Aussie last buying $0.6717 and the kiwi $0.6287.
The pound was flat after a rollercoaster overnight session where
it leapt on reports of a breakthrough on the Irish backstop and then
gave up the gains as hopes of progress on a key sticking point for a
Brexit deal were dashed.
It steadied at $1.2214 per pound, not far above a one-month low.
(Reporting by Tom Westbrook Editing by Lincoln Feast)
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