Yuan nears 1-week low, eyes on China's Politburo, US Fed

SHANGHAI: China's yuan touched a near one-week low against the dollar on Monday, as investors cautiously awaited the outcome of key political and economic meetings in Beijing and abroad later this week.

The Politburo, the top decision-making body of the ruling Communist Party, usually meets during the final week of each month, and investors will be watching for any news of the outcome as it should yield some insight on the state of the economy and policy direction going into the second half of the year.

In the United States, the Federal Reserve policy-making committee will wrap up two-day meeting on July 28, with traders looking for clues on the timing of tapering the monetary stimulus.

Yuan bounces off 2-1/2-month low, still set for 6th straight weekly loss

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.4763 per dollar, 113 pips or 0.17% weaker than the previous fix of 6.4650.

In the spot market, onshore yuan opened at 6.4800 per dollar and eased to a low of 6.4858, the weakest level since July 20. By midday, it was changing hands at 6.4841, 34 pips softer than the previous late session close.

A trader at a Chinese bank said the overall sentiment in China's financial markets were weakened by new cases of coronavirus rising to their highest since late January. Equity markets slumped on worries that the government's response could be heavy-handed, and dampen economic activity.

Despite recent "easing measures, such as the reserve requirement ratio (RRR) cut, we believe China's economy, and specifically its financial system, will face significant risks in coming months due to the unprecedented tightening measures applied to the property sector," Lu Ting, chief China economist at Nomura, said in a note.

Traders said the market barely reacted to latest evidence of the dismal state of Sino-US relations, as a high-ranking Chinese diplomat said some people in the United States viewed China as an "imaginary enemy".

By midday, the global dollar index fell to 92.852 from the previous close of 92.896, while the offshore yuan was trading at 6.4856 per dollar.