China’s yuan inches lower on weak industrial profit data

HONG KONG: China’s yuan slipped from a seven-month high against the US dollar on Friday, weighed by disappointing industrial profit data, but progress in US-China trade negotiations eased some of the pressure.

Data showed China’s industrial profits swung back into sharp decline in May from a year earlier, as factory activity slowed in the face of broader economic stress and a fragile trade truce with the United States.

As of 0830 GMT, the onshore yuan CNY=CFXS ended its domestic trading session 0.03% lower at 7.1690 to the dollar after trading in a range of 7.1655 to 7.1747.

In the previous session, the yuan strengthened to 7.1565 per dollar, the strongest since November 8.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1627 per dollar, 144 pips firmer than a Reuters’ estimate.

The spot yuan is allowed to trade 2% either side of the fixed midpoint each day. Separately, China’s trade-weighted CFETS yuan basket index fell to 95.36 in early trade, its lowest level since January 4, 2021, based on Reuters estimates.

The yuan is up 0.4% against the dollar this month, and 1.8% firmer this year.

It also marks a fourth straight weekly gain on Friday. Despite China’s cloudy macroeconomic outlook, the yuan found some support thanks to a weakening dollar amid growing market concerns about the US Federal Reserve’s independence, and some silver linings in the Sino-US trade war.

The United States reached an agreement with China on how to expedite rare earth shipments to the US, a White House official said on Thursday.

US President Donald Trump earlier confirmed the United States had signed a trade deal with China.

“Such an agreement is not a comprehensive trade deal, but it is still important to preserve the US-China trade truce and limit tariff increases,” DBS analysts said in a note.

Sentiment towards the yuan can improve durably given a renewed official agreement, they said, expecting the offshore yuan to strengthen against the dollar towards 7.15.

The offshore yuan traded at 7.1675 yuan per dollar, down about 0.04% in Asian trade.

The dollar’s six-currency index was 0.173% lower at 97.21.