SHANGHAI: China’s yuan eased on Wednesday against a strong dollar, as an agenda-setting meeting of China’s top leaders failed to deliver strong stimulus to boost demand, while the dollar rallied after an unexpected rise in US inflation.
China will focus on boosting effective demand next year, and make concerted efforts to spur domestic demand, state media said, citing the annual Central Economic Work Conference (CEWC) held from Dec. 11-12, during which top leaders set economic targets for 2024.
“We must introduce more policies that are conducive to stabilising expectations, stabilising growth, and stabilising employment,” state media said, quoting top officials led by President Xi Jinping at the meeting.
“Conclusion of China’s CEWC was packed with reforms but light on stimulus. Markets are likely to be disappointed,” analysts at Citi said in a note, adding that there is a clear absence of consumption stimulus.
UBS Economist Ning Zhang expects some progress on recently reported property policy easing, however he does not expects any aggressive easing or large-scale consumption subsidies yet, with decelerating infrastructure investments.
Meanwhile, the global dollar index rose to 103.875 from the previous close of 103.865, after unexpected Nov. inflation rise in the US had investors rethink about Fed rate cuts.
Investors are closely watching the Federal Reserve meeting on Wednesday to gauge a policy path that could affect yuan-dollar dynamics.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1126 per US dollar, 48 pips firmer than the previous fix 7.1174.
The fix continued to be set strong, around 600 pips firmer than Reuters’ estimate.
The spot yuan opened at 7.1799 per dollar and was changing hands at 7.1834 at midday, 72 pips weaker than the previous late session close.
The offshore yuan was trading 114 pips weaker than the onshore spot at 7.1948 per dollar.
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