SHANGHAI: China’s yuan eased on Tuesday from a seven-month high against the dollar it booked a day earlier, as some investors cashed in ahead of a string of economic data that is likely to affect the currency’s outlook.
Prior to the market 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 7.1318 per dollar and 136 pips firmer than a Reuters’ estimate.
At 0315 GMT, the onshore yuan was 0.1% lower at 7.1469 per dollar, compared with a seven-month peak of 7.1120 it hit on Monday.
Its offshore counterpart traded at 7.1420 per dollar around midday, down from the high of 7.0636 it touched a day earlier.
Both onshore and offshore yuan leapt on Monday, underpinned by a stronger Japanese yen and investors rushing to unwind their emerging market carry trades.
Yuan assets also outperformed amid a global sell-offs in stocks, oil and higher-yielding currencies on Monday.
China’s yuan leaps to 7-month high, led by stronger yen, unwinding of carry trade
Currency traders said market sentiment stabilised on Tuesday after U.S. central bank policymakers pushed back against the notion that weaker-than-expected July jobs data meant the economy is in recessionary freefall, but also warned that the Federal Reserve will need to cut rates to avoid such an outcome.
China’s yuan is still down 0.6% against the dollar so far this year, but its recent recovery “has created considerable room for the PBOC to implement further easing measures in the coming months, particularly given the weak credit demand and continued deflationary pressure domestically,” said Serena Zhou, senior China economist at Mizuho Securities Asia.
Traders and analysts said market attention has switched to upcoming Chinese data including trade, inflation and credit lending to gauge the health of the broader economy.
Manufacturing surveys released last week showed factory activity slumped in July.
July trade data is scheduled on Wednesday, and inflation data is due to be released on Friday.
China’s yuan has been under pressure since early 2023 as domestic woes around a moribund property sector, anaemic consumption and falling yields drive capital flows out of the yuan, and as foreign investors stay away from its struggling stock market.
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