China’s yuan eases from 7-month peak, econ data in focus

SHANGHAI, Aug 6 (Reuters)China’s yuan eased on Tuesday from a seven-month high against the dollar and gave back most of the gains 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 market opening, the People’s Bank of China (PBOC) set the midpoint rate CNY=PBOC, 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 0219 GMT, the onshore yuan CNY=CFXS was 0.19% lower at 7.1530 per dollar, compared with a seven-month peak of 7.1120 it hit on Monday.

Its offshore counterpart CNH=D3 traded at 7.1468 per dollar around 0219 GMT, down from the high of 7.0636 it touched a day earlier.

Both onshore CNY=CFXS and offshore CNH=D3 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.

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 0.7% against the dollar so far this year, and the 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 data including inflation and credit lending to gauge the health of the broad economy.

July 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.

Reporting by Shanghai Newsroom; editing by Miral Fahmy



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