SHANGHAI: China’s yuan hovered near a seven-month low against the US dollar on Tuesday as stronger guidance from the central bank offset mixed economic data, while traders awaited US data and comments from Federal Reserve officials for more clarity on interest rate cuts.
By 0356 GMT, the yuan was 0.01% higher at 7.2556 against the dollar after trading in a range of 7.2539 to 7.2560.
Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1148 per dollar, 1,346 points firmer than a Reuters’ estimate.
The spot yuan opened at 7.2539 per dollar and was last trading 3 pips firmer than the previous late session close and 1.98% weaker than the midpoint.
Data on Monday showed China’s May industrial output lagged expectations with the property sector still weak, putting more pressure on Beijing for policy support to shore up growth, but retail sales beat forecasts thanks to a holiday boost.
“The overall activity picture remains a weak one and this fragile growth outlook could continue to keep the yuan on the backfoot,” said Maybank analysts in a note.
“Ratcheting up of trade tensions between China and its partners are concerns that we remain wary of especially those related to the US.”
US retail sales data is due at 1230 GMT, followed by weekly jobless claims on Thursday and flash purchasing managers’ indexes on Friday. Also, a long list of Fed officials take to the podium at various venues later in the day.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, expected the onshore yuan will weaken to 7.30 against the dollar in the coming months on the back of strengthening greenback.
The yuan is down 0.2% against the dollar this month, and 2.1% weaker this year.
The offshore yuan traded at 7.2712 yuan per dollar, down about 0.01% in Asian trade.
Chinese government 10-year bond yields fell 0.7 basis points to 2.27%.
The yield on similar US government benchmark debt was 4.3%. The yuan onshore 7-day benchmark repo rate was at 1.89%.
The dollar’s six-currency index was 0.123% higher at 105.400.
The official trade-weighted CFETS index was last published on 14 June and is at 99.89, up 2.5 points so far this year.
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