HONG KONG: China’s yuan inched lower against the US dollar on Tuesday, weighed down by weaker official guidance and concerns about China’s economy as traders awaited a raft of global interest rate decisions and a key Politburo meeting.
China’s central bank fixed the midpoint of the yuan’s daily range at 7.1364 per dollar, its weakest level in eight months, which traders took as a sign authorities will tolerate a cheaper currency.
At 03:22 GMT, the yuan was about 0.03% lower at 7.2628 to the dollar after trading in a range of 7.2615 to 7.2653.
The yuan is down 2.2% on the dollar this year and under pressure as China falls short of growth expectations and the outlook has weighed on commodity prices around the world.
Broader currency markets were also keeping to narrow ranges as traders braced for central bank decisions in Japan and the US on Wednesday and comments from policymakers on the trajectory of interest rates.
Back home, investors were keenly awaiting the outcome of the upcoming Politburo meeting, which will be attended by China’s top leaders. The focus will be on any additional policy stimulus, following reform plans laid out at the third plenum two weeks ago.
China’s official manufacturing survey (PMI) will also be released on Wednesday.
“PMI releases tomorrow may give little respite for the RMB as activity looks to stay sluggish,” DBS analysts said in a note, adding that the US Federal Reserve’s guidance this week will be front and centre of investors’ minds.
China’s yuan eases slightly as dollar stabilizes
Waning domestic demand continues to pressure the yuan.
Citi on Monday lowered its 2024 economic growth forecast for China to 4.8% year-on-year, citing further softening in economic activities.
“The risk of deflation in China is real,” said Bob Savage, head of markets and strategy at BNY Mellon.
Savage expects the yuan to trade between 7.2 and 7.4 against the dollar in near term, depending on the greenback/yen levels and the pace of US rate cuts.
The offshore yuan traded at 7.2725 yuan per dollar, down about 0.01% in Asian trade.
The dollar’s six-currency index was 0.019% higher at 104.6.