SHANGHAI: China’s yuan touched a two-month low against the dollar on Friday and looked set for its biggest weekly drop since May, as much weaker-than-expected economic growth data raised doubts about this year’s growth target.
China’s economy contracted sharply in the second quarter from the previous quarter while annual growth also slowed significantly, highlighting the colossal toll on activity from widespread COVID lockdowns, which jolted industrial production and consumer spending.
While June data showed some signs of improvement, analysts do not expect a rapid recovery as the government sticks with its tough zero-COVID policy and global growth slows.
“The downside pressure on the broad economy is huge. And, it is challenging to reach this year’s growth target,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7503 per dollar, weaker than the previous fix of 6.7265.
In the spot market, the onshore yuan opened at 6.7505 per dollar and eased to a low of 6.77, the weakest level since May 17. By midday, it was changing hands at 6.7663, 82 pips softer than the previous late session close.
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