SHANGHAI: China’s yuan held steady against the dollar on Tuesday as a firmer-than-expected official guidance rate offset investor hopes for more stimulus to support growth momentum following a mixed bag of second-quarter economic data.
The economy slowed in the second quarter despite bettering market forecasts in a show of resilience to U.S. tariffs, though analysts warn of underlying weakness and growing risks that will ramp up pressure on Beijing for more stimulus.
“External trade alone cannot compensate for the drag from weak domestic demand,” said Sarah Tan, an economist at Moody’s Analytics.
“Without stronger, sustained policy support and structural reforms to boost household incomes and confidence, China’s recovery risks a further loss of momentum in the second half.”
By 0353 GMT, the onshore yuan was down 0.01% at 7.1733 per dollar, while its offshore counterpart was down about 0.04% in Asian trade, at 7.1759.
Prior to the open, the People’s Bank of China (PBOC) set the midpoint rate at 7.1498 per dollar, 260 pips firmer than a Reuters’ estimate of 7.1748. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
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After the second-quarter data, market attention will shift to this month’s approaching Politburo meeting, which is likely to shape economic policy for the rest of the year, traders and analysts said.
“We expect discussion to be centred on the property sector after a string of poor housing data and onshore media leaks that revolved around potential property stimulus,” said Alex Loo, a macro strategist at TD Securities, referring to the meeting’s agenda.
Market participants will also closely monitor U.S. inflation data set to be released later in the day, for clues to the path for monetary policy in the world’s largest economy which could influence the yuan among major currencies, traders said.
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