SHANGHAI: China’s yuan slipped against the dollar on Monday, trading within tight ranges ahead of more clarity on the August 12 trade truce deadline between the world’s two largest economies.
Market participants broadly expect a 90-day extension for the trade truce after earlier talks in Stockholm.
Markets are also weighing the risk that Washington may impose additional tariffs in response to China’s purchases of Russian oil, analysts at investment bank CICC said in a note.
“Against a backdrop of a stronger yuan midpoint, the yuan is expected to remain broadly stable with limited volatility in the near term,” they said.
Meanwhile, the U.S. dollar stabilised on Monday after last week’s losses, ahead of Tuesday’s key U.S. CPI report for July.
The spot yuan opened at 7.1835 per dollar and was last trading at 7.181 as of 0331 GMT, 11 pips softer than the previous late session close and 0.57% weaker than the midpoint.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1405 per dollar, 440 pips firmer than a Reuters’ estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
China’s producer prices fell more than expected in July, data showed on Saturday, while consumer prices were unchanged, underscoring the impact of sluggish domestic demand and persistent trade uncertainty on consumer and business sentiment.
While overcapacity and price controls may be more manageable in commodity sectors dominated by state-owned firms, addressing cutthroat competition in industries where private companies play a larger role is expected to be more complex and time-consuming, analysts at Commerzbank said in a note.
China’s top leaders pledged last week to step up regulation of aggressive price-cutting by Chinese companies, as the world’s second-biggest economy struggles to shake off persistent deflationary pressures.
Markets are also awaiting China loan growth and retail sales data this week for clues on the economy’s health and policy implications.
The offshore yuan traded at 7.1836 yuan per dollar, up about 0.04% in Asian trade.
The dollar index, which measures the greenback against a basket of currencies, was 0.170% lower at 98.06.
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