China's yuan is set to post its biggest weekly loss in two months on Friday thanks to a resurgent dollar and cooling expectations about the economy's outlook after recent data. Growth in China's vast factory sector slowed to a three-month low in August as output and new orders moderated, a preliminary private survey showed on Thursday.
After a hopeful bounce in June, spurred in large part by government stimulus, China's economic growth appears to be softening again, with indicators ranging from lending to output and investment all pointing to weakness. On Friday, the People's Bank of China set the yuan midpoint at 6.1617 per dollar prior to the market open, marginally stronger than 6.1632 on Thursday, which was the weakest level in two weeks. The currency is allowed to trade in a 2 percent band around the midpoint.
The yuan was trading at 6.1596 in late morning trades, weaker than Thursday's close for 6.1514 and set for its first weekly loss since the third week of June, according to Thomson Reuters data. Still, the yuan's decline has been orderly as evident from the narrowing spreads between the offshore and the onshore market, unlike the panicky wide spreads seen earlier this year.