What’s going on here?
The yuan bounced back against the dollar after three days of losses, with spot yuan starting at 7.1293 per dollar and trading slightly stronger at 7.1256. Meanwhile, the offshore yuan also edged up in Asian trade.
What does this mean?
Traders are focusing on pivotal US inflation data and Chinese manufacturing activity, with the US Federal Reserve’s rate decisions and the personal consumption expenditures index due on Friday, and China’s latest purchasing managers’ index set for release on Saturday. UBS has trimmed its 2024 economic growth forecast for China to 4.6% from 4.9%, citing weaker property activity. Exporters’ hedging strategies are boosting sentiment around the offshore yuan, and analysts note minimal need for the People’s Bank of China to intervene, given the current consolidation of the dollar.
Why should I care?
For markets: Dollar dynamics in play.
The dollar index held steady at 100.98 in Asia trade, following a dip to a 13-month low earlier this week. The yuan’s performance has been largely influenced by movements in the dollar and the Fed’s policy direction. This month, the yuan has appreciated by 1.3% against the dollar, nearly recouping its yearly losses as the greenback weakened.
The bigger picture: All eyes on economic data.
Upcoming data releases in the US and China are critical for assessing economic health and policy directions. The Fed’s rate decisions and the PCE index will provide insights into US inflation trends, while China’s PMI will shed light on its manufacturing sector. With UBS lowering China’s growth outlook, global markets are keenly watching these indicators to gauge future economic trajectories.
