SHANGHAI: The yuan fell on Wednesday to its lowest against the dollar since the end of November, with sentiment hit by weak manufacturing data suggesting China’s post-COVID recovery was faltering.
China’s manufacturing activity contracted more than expected in May on weakening demand, an official factory survey showed on Wednesday, heaping pressures on policymakers to shore up the patchy economic recovery.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate at 7.0821 per US dollar, 3 pips weaker than the previous fix 7.0818.
The spot yuan opened at 7.0900 per dollar and was changing hands at 7.1045 at midday, 257 pips weaker than the previous late session close.
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Bearish factory activity data, on the heels of lacklusture consumption and industrial production figures, is further evidence China’s post-reopening recovery is losing steam, UBS analysts said.
They added that offshore yuan weakened against the dollar to 7.111 following the data.
Citi analysts said trades betting on a weaker offshore yuan against the dollar were among the most thematic and popular themes, as clients continue to question the strength of China’s recovery while US data keeps surprising to the upside.
Meanwhile, Maybank analysts said they looked for Sino-US growth and monetary policy divergence that could continue to provide support for onshore and offshore yuan on dips.
By midday, the global dollar index rose to 104.283 from the previous close of 104.165.
The offshore yuan was trading 135 pips weaker than the onshore spot at 7.118 per dollar.
The one-year forward value for the offshore yuan traded at 6.9093 per dollar, indicating a roughly 3.02% appreciation within 12 months.
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