China yuan eases as soft economic data, weaker fixing weigh
SHANGHAI: China’s yuan eased against the dollar on Tuesday, pressured by sluggish July data and a softer central bank midpoint that pointed to policymakers’ desire to slow the currency’s recent gains. China’s economy lost momentum at the start of the second half, with industrial output and retail sales slowing as extreme weather disruptions and persistently weak domestic demand renew pressure on…
China's yuan weakened against the US dollar on Tuesday, influenced by weak economic indicators and a lower midpoint issued by the central bank, indicating policymakers' intent to curb the currency's recent gains. The Chinese economy slowed in the first half of the year, with drops in industrial output and retail sales, compounded by adverse weather impacts and steady low domestic demand, putting pressure on officials to ramp up stimulus measures.
The spot yuan commenced at 6.7440 per dollar and was last trading at 6.7439 as of 0213 GMT, marking a 22-pip decline from the previous session's close. Huatai Futures analysts noted that the yuan's recent appreciation was largely passive, stemming from dollar weakness. They advised caution, as net long dollar positions had accumulated to approximately $50 billion, a level that could intensify a dollar rebound and potentially limit the room for yuan appreciation.
The yuan has gained 0.6% against the dollar this month and 3.7% so far this year. The US dollar remained near multi-month lows versus major currencies on Tuesday as traders retracted expectations of immediate rate hikes, though the looming prospect of Middle East conflict tension kept sentiment uncertain. Before trading began, the People's Bank of China set the midpoint at 6.7905 per dollar, which was 453 pips lower than the Reuters' forecast.
The central bank has been incrementally tightening its daily yuan guidance, but at a pace lower than market forecasts, signaling a desire to control the rate of appreciation. MUFG analysts projected the yuan to reach 6.65 per dollar by year-end, citing ongoing export growth and recurring tech-related asset revaluation potential that might draw foreign capital.
Nonetheless, the pace of appreciation is likely to be slow due to substantial domestic growth challenges, they added. Investors are also monitoring next week's Federal Reserve symposium in Jackson Hole for insights into how policymakers interpret recent economic data. The offshore yuan was trading at 6.7454 per dollar, a slight 0.02% decrease in Asian trade.
The dollar index, which gauges the greenback against a basket of six currencies, rose 0.059% to 99.6.
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