SHANGHAI/SINGAPORE: China’s yuan was little changed against the dollar on Wednesday despite weakness in the greenback and a reports that Beijing is planning fresh economic stimulus, as worries linger over the country’s deepening property crisis.
The spot yuan was changing hands around 7.2940 in late morning trade, close to the previous late session close. Prior to the market open, China’s central bank set the middpoint steady at 7.1779 per dollar.
The yuan failed to take advantage of the greenback’s weakness, as the dollar index dropped after a slide in Treasury yields triggered by traders paring US interest rate expectations.
China’s yuan edges up as dollar softens, eyes on Sept data
A flood of safe haven buying that had boosted the dollar attacks by Hamas on Israel appears to have abated.
“The outbreak of Middle East tensions has been a surprise to markets, posing headwinds to our tactical trades,” DBS Group wrote in a note to clients.
The dollar index fell “with typical safe haven USD demand being outweighed by a decline in US treasury yields.”
Meanwhile, Chinese markets appeared little fazed by a Bloomberg report that China is considering an additional 1 trillion yuan ($137.10 billion) of government bond issuance to fund infrastructure, potentially raising the budget deficit above the 3% cap for 2023.
“The yuan was rather muted on the news, likely also weighed by speculation of rate cuts,” Maybank said in a note.
Citi analyst Rocky Huang said that “I’m not buying into this story as this will increase the deficit above the cap set by the People’s Congress.”
While there have been recent signs of stabilisation in parts of the world’s second-biggest economy, the worsening property crisis continues to cloud the outlook for recovery.
Country Garden warned on Tuesday about its inability to meet offshore debt obligations, potentially joining a growing list of Chinese developers that have defaulted and setting the stage for one of the country’s biggest debt restructurings.
The International Monetary Fund on Tuesday cut its growth forecasts for China, citing the deepening real estate crisis.