HONG KONG: China’s yuan was firmer against the US dollar on Monday, supported by the central bank’s move to raise the daily reference rate to its strongest level in almost eight months.
Chinese manufacturing shrank for a third month in June but the figure was within expectations and did not put pressure on the yuan.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1586 per dollar, its strongest since November 8, 2024 and 95 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The central bank has been gradually allowing some yuan appreciation, investors said.
“The main reason why the central bank has guided the appreciation of the yuan is continued weakness in the US dollar,” Shanghai Chongyang Investment Management said in a note to clients.
US President Donald Trump’s tariff policies and concerns about their impact on economic growth as well as worries about the indepedence of the Federal Reserve have led to a 10% decline in the dollar index this year.
As of 0352 GMT, the yuan was 0.14% higher at 7.1641 to the dollar after trading in a range of 7.1618 to 7.1686. The yuan is up 0.5% against the dollar this month, and 1.9% firmer this year.
Shanghai Chongyang also said that the central bank was likely encouraged to allow appreciation after data from the past two months showed that the impact of reciprocal tariffs on Chinese exports has so far been limited.
The official purchasing managers’ index (PMI) rose to 49.7 in June versus 49.5 in May, below the 50-mark separating growth from contraction, though that was in line with a Reuters forecast.
Yuan lower on weak industrial data
“The economic momentum is stable partly due to strong exports… I think monetary policy will stay on hold for now. The policy makers will likely wait and monitor the development of trade war,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
Offshore yuan traded at 7.163 yuan per dollar, up about 0.15% in Asian trade.
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