By Anneken Tappe

Yuan loses ground after U.S. stops short of calling China a currency manipulator

The U.S. dollar strengthened as Thursday's session went on, leading to a softening of risk-sensitive currencies.

Meanwhile, Treasury Secretary Steven Mnuchin said he wouldn't attend the upcoming investment conference in Saudi Arabia, which coincided with a brief spike for the buck.

Mnuchin's decision followed Secretary of State Mike Pompeo saying the Saudi government should be given more time (http://www.marketwatch.com/story/mnuchin-pulls-out-of-saudi-conference-as-pompeo-says-khashoggi-probe-needs-more-time-2018-10-18) to investigate the disappearance of journalist Jamal Khashoggi whose suspected murder in the Saudi embassy in Turkey led to several corporate executives pulling out of the conference.

The ICE U.S. Dollar Index was last up 0.1% at 95.694, while risk-sensitive currencies such as the Canadian dollar and Australian dollar softened.

Emerging markets currencies also deepened their losses against the buck, with the largest moves in the Mexican peso and Turkish lira , against which the dollar rallied 1.5% and 1.3%, respectively.

The peso also suffered after earlier comments from President Donald Trump who, in a tweet, threatened to close the southern U.S. border (https://twitter.com/realDonaldTrump/status/1052885781675687936) to Mexico over immigration issues.

Elsewhere, the Treasury refrained from labeling China a currency manipulator (http://www.marketwatch.com/story/us-treasury-declines-to-label-china-a-currency-manipulator-but-says-recent-yuan-weakness-is-a-concern-2018-10-17) in its biannual report on foreign exchange practices released late Wednesday, saying intervention by the People's Bank of China has been limited this year. But it did issue a stern warning about yuan weakness, which has declined by around 7% versus the dollar in 2018.

Analysts have largely attributed the yuan-dollar weakness to market forces, including the emerging market selloff over the summer, as opposed to willful devaluation as a tactic in the U.S.-China trade war. A weaker currency makes a country's goods more competitive on the global market.

Don't miss:Here's why investors shouldn't take their eyes off China's yuan (http://www.marketwatch.com/story/heres-why-investors-shouldnt-take-their-eyes-off-chinas-yuan-2018-10-17)

The yuan weakened following to the report. In Beijing, the Chinese currency briefly touched its lowest level since January 2017 after the report's release. One buck last fetched 6.9376 yuan , up 0.2%. In the offshore market, the yuan was at its lowest level since August on Thursday, with one dollar buying 6.9493 yuan , up 0.3%.

The currency weakness also came as Chinese stocks hit four-year lows (http://www.marketwatch.com/story/asian-markets-pull-back-led-by-sharp-declines-in-china-2018-10-17) to lead Asian equities to the downside. The Shanghai Composite dropped nearly 3%, while the Shenzhen Composite lost 2.7%.

In other China news, the country's gross domestic product data for the third quarter -- expected at 6.6% on the year -- is due at 10 p.m. Eastern.

In Brussels, the latest European Union summit on the topic of Brexit kicked off Wednesday, with the possible extension of the post-Brexit transition period to three years seemingly at the center of talks. This extension would give the U.K. an additional year to agree a trade deal with the EU and is considered an olive branch in the negotiations.

The euro was slightly weaker at $1.1494, down from $1.1502 late Wednesday, while the British pound bounced around between positive and negative territory, last trading at $1.3060, down from $1.3114.

(END) Dow Jones Newswires

October 18, 2018 14:11 ET (18:11 GMT)

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