China yuan eases as soft economic data, weaker fixing weigh
- The spot yuan opened at 6.7440 per dollar and was last trading at 6.7439
SHANGHAI: China’s yuan eased against the dollar on Tuesday, pressured by sluggish July data and a softer central bank midpoint that pointed to policymakers’ desire to slow the currency’s recent gains.
China’s economy lost momentum at the start of the second half, with industrial output and retail sales slowing as extreme weather disruptions and persistently weak domestic demand renew pressure on policymakers to step up stimulus.
The spot yuan opened at 6.7440 per dollar and was last trading at 6.7439 as of 0213 GMT, 22 pips lower than the previous late session close.
Analysts at Huatai Futures said that the recent yuan appreciation was largely passive, driven by dollar weakness.
They cautioned that positioning warrants attention, with net long dollar positions having accumulated to around $50 billion – an elevated level that could amplify a dollar rebound if triggered, potentially narrowing the window for yuan appreciation.
The yuan is up 0.6% against the dollar this month, and 3.7% firmer this year.
The US dollar held near multi-month lows against most major currencies on Tuesday as traders walked back expectations of near-term monetary tightening, although the imminent threat of an escalation in the Middle East war left sentiment fragile.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7905 per dollar, 453 pips weaker than a Reuters’ estimate.
The central bank has been gradually strengthening its daily yuan official guidance but at levels weaker than market expectations, suggesting it wants to manage the pace of appreciation.
Analysts at MUFG forecast the yuan to firm to 6.65 per dollar by year-end, citing continued export strength and recurring tech-led asset revaluation themes that could attract foreign investment.
However, the pace of appreciation will likely be gradual given intense domestic growth headwinds, they said.
Investors are also looking ahead to next week’s Federal Reserve symposium at Jackson Hole for clues on how policymakers interpret the latest economic data.
The offshore yuan traded at 6.7454 yuan per dollar, down about 0.02% in Asian trade.
The dollar index, which measures the greenback against a basket of six currencies, was 0.059% higher at 99.6.