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SHANGHAI: China’s yuan slipped to nearly a one-week low against the dollar on Monday, as investors grew cautious ahead of domestic factory activity data and a Federal Reserve meeting later this week.

The yuan barely budged but market sentiment was dampened after a Hong Kong court ordered that property giant China Evergrande Group be liquidated, traders and analysts said.

The liquidation “at least reminds investors of China’s property downturn,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1097 per dollar, 23 pips weaker than the previous fix of 7.1074.

The central bank continued with its months-long practice of setting the official guidance rate at firmer levels than the market’s projections, traders and analysts said, widely seen as an attempt to keep the currency stable.

Monday’s midpoint was 659 pips firmer than a Reuters estimate of 7.1785.

China’s yuan eases but set to snap three straight weeks of losses

In the spot market, the onshore yuan opened at 7.1780 per dollar and slipped to a low of 7.1833, the weakest level since Jan. 23. By midday, it was changing hands at 7.1825, 40 pips softer than the previous late session close.

Traders said dollar movements and stabilisation in mainland listed A shares - on Beijing’s support policies, including a cut in bank reserves - have been among key factors guiding the yuan.

“This mix of easier policy that includes fiscal and credit measures, as well as efforts to support the property market, is less currency negative than purely monetary easing that maintains a wide U.S.-China rate differential,” analysts at Goldman Sachs said in a note.

“While policymakers have indicated a clear aversion to currency weakness, significant yuan strength is also unlikely to be desired given the need to maintain easy financial conditions to support sluggish growth,” they said, expecting the yuan to trade in a narrow range around their three-month forecast of 7.15 per dollar.

Both the blue chip CSI300 Index and the benchmark Shanghai Composite index were largely flat on Monday morning.

Traders said they will switch their attention to China’s January manufacturing data due on Wednesday to gauge the health of the broad economy.

Separately, the outcome of the Fed’s policy meeting this week is also in focus, they added. The Fed is widely expected to stand pat on rates, leaving the spotlight all on Fed Chair Jerome Powell and his comments.

By midday, the global dollar index rose to 103.526 from the previous close of 103.433, while the offshore yuan was trading at 7.1939 per dollar.

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