China’s yuan slips from month high after weaker-than-forecast GDP

SHANGHAI, July 15 (Reuters) –China’s yuan weakened on Monday from a one-month high against the dollar hit in the previous session, following weaker-than-expected second-quarter data that points to slowing economic momentum and the need for more stimulus.

China’s economy expanded 4.7% in the second quarter from a year earlier, official data showed on Monday, missing analysts’ expectations, even as policymakers seek to boost domestic demand amid a protracted property downturn.

“Overall, the disappointing GDP data shows that the road to hitting the 5% growth target remains challenging, and we will need to see further policy support in the coming months if this goal is to be reached,” said Lynn Song, chief economist for Greater China at ING.

At 0302 GMT, the yuan CNY=CFXS was 0.13% weaker at 7.2597 to the dollar after booking the biggest weekly gains last week since late December.

The yuan is still down 2.2% year-to-date. It 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 Chinese currency, and foreign investors avoid its struggling stock market.

Prior to the 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 7.1313 per dollar and 1,235 pips firmer than a Reuters’ estimate.

The central bank has been gradually lowering its daily yuan official guidance, well within market projections but with a bias suggesting it is allowing some depreciation, traders and analysts said.

The offshore yuan traded at 7.2738 yuan per dollar CNH=D3, compared with the previous close of 7.2710 on Friday.

Meanwhile, top leaders are scheduled to start a twice-a-decade policy meeting from Monday. With business, employment and consumer sentiment near record lows, the four-day plenum will seek to inject confidence in the economy, but conflicting goals, such as boosting growth while cutting debt, may mean little progress toward implementing change.

“The meeting is unlikely to provide any immediate and specific measures for the economy, as it will be focused on guiding the long-term direction of the economy,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

Separately, China’s central bank left its medium-term lending facility (MLF) rate unchanged as expected on Monday when rolling over maturing medium-term loans. Beijing’s easing efforts continue to be constrained by a weak currency and narrowing interest margins at banks.

Key onshore vs offshore levels:

LEVELS AT 0302 GMT:

Reporting by Shanghai Newsroom; Editing by Jacqueline Wong