SHANGHAI: China’s yuan eased against the dollar on Tuesday as disappointing August factory activity data raised bets for more stimulus in the world’s second-largest economy.

With markets now firmly expecting the US Federal Reserve to cut interest rates in September, many yuan traders said that could give Beijing more leeway to manoeuvre its own monetary policy.

“Fed rate cuts provide room for the People’s Bank of China (PBOC) to ease without spurring capital outflows,” said Chang Wei Liang, FX & credit strategist at DBS.

Analysts at J.P. Morgan also said that easing yuan depreciation pressure in the short term “may open the room for continuing policy rate cuts” in China.