China's yuan weakened on Monday as trade data showed both imports and exports for the world's second largest economy fell significantly faster than economists had expected. The spot market opened at 6.6610 per dollar and was changing hands at 6.6595 at midday, 90 pips away from the previous close and 0.03 percent away from the central bank's midpoint. The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
The People's Bank of China set the midpoint rate at 6.6615 per dollar prior to market open, weaker than the previous fix 6.6406. The offshore yuan was trading 0.13 percent weaker than the onshore spot at 6.6682 per dollar. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.7865, 1.84 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate. "The data was definitely a bit worse than people were thinking," said a trader at a commercial bank in Shanghai. "Also the yuan had strengthened quite a bit in recent weeks so there may have been some profit taking." Dollar denominated Chinese imports fell 12.5 percent on the year in July, customs data released Monday showed, missing expectations of a seven percent fall according to a Reuters poll of economists. Exports also missed forecasts, falling 4.4 percent on the year against market expectations of a three percent fall.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.28, firmer than the previous day's 95.16. The global dollar index fell to 96.188 from the previous close of 96.194.
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