SHANGHAI: China’s yuan briefly touched a 10-day high against the dollar on Monday but pared all its gains as fresh signs of a slowdown in the world’s second-largest economy hit market sentiment.

Official data showed China’s factory output and retail sales growth both slowed in July as export growth cooled and new COVID-19 outbreaks disrupted business.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at a 10-day high of 6.4717 per dollar, 82 pips or 0.13% firmer than the previous fix of 6.4799.

In the spot market, onshore yuan opened at 6.4733 per dollar, the highest level since Aug. 6, and was changing hands at 6.4775 at midday, 8 pips weaker than the previous late session close.

The retreat in the spot yuan was driven by the disappointing data that fueled concern about growth momentum in China, traders said, as fundamentals remained the key factor deciding the yuan’s value over mid- to long-term.

Terence Wu, FX strategist at OCBC Bank, said the weaker activity indicators and widening outbreaks of Delta variant have reinforced easing PBOC’s easing measures.

“Thus far, negatives in Asian currencies have been largely domestically driven. Global cues are still relatively benign, especially in the context of falling real yields in the DM economies. Should there be a secular move higher in real yields later in the year, EM Asian currencies could come under more pressure,” Wu said in a note.

Many market economists and analysts believed more easing measures were needed to arrest the economic slowdown, but powerful tools including rate cut should be unlikely.

“We expect fiscal policies to be more proactive at pushing belated infrastructure projects,” said Iris Pang, Greater China economist at ING.