Yuan rally hits speed bump as economy drags

SINGAPORE: The yuan slipped on Monday, taking a breather after six weeks of gains, as mixed economic data and the outlook for low short-term interest rates pushed it to the weak side of 7.1 per dollar.

In morning trade the yuan slipped about 0.3% to 7.1112 per dollar. It had traded as strong as 7.0825 on Friday, its highest in more than a year, drawing state banks to buy dollars and slow the yuan’s rise. The yuan has gained about 2.4% on the dollar since late July, mostly as the greenback has fallen in anticipation of US interest rate cuts. Trading on the strong side of 7.1 per dollar was not justified by the weak economic backdrop, National Australia Bank currency strategists said on Monday, though over the longer term they expect a weakening dollar to lift the yuan.