Chinese Yuan: Uptrend intact with muted inflation against US Dollar – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad reports that USD/CNH continues to drift lower to its weakest level since January 2023 as China’s August Consumer Price Index (CPI) rose modestly while overall inflation remains subdued.
The USD/CNH exchange rate has continued its downward trend, reaching its lowest point since January 2023. China's August Consumer Price Index (CPI) showed modest growth, but overall inflation remains relatively subdued. The headline CPI matched market expectations at 0.8% year-over-year, up from 0.5% in July. This increase was driven by higher prices for communication equipment and energy.
However, when compared to the Producer Price Index (PPI), inflation remains muted. The core CPI and PPI both surpassed forecasts in August, with the core CPI at 1.0% year-over-year (consensus: 0.9%, prior: 0.9%) and PPI at 3.8% year-over-year (consensus: 3.6%, prior: 3.5%).
Lower inflation relative to PPI suggests that firms have limited pricing power to pass on higher costs to consumers, which is putting pressure on profit margins and indicating weak domestic demand. BBH's Elias Haddad believes that a stronger Chinese Yuan (CNY) could support a shift towards consumption-led growth, as it would provide consumers with more disposable income through cheaper imports. Despite this, the downtrend in the USD/CNH exchange rate is still ongoing.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
