SHANGHAI: China’s yuan is set to end the week lower against a strong US dollar as statements from a key leadership gathering failed to lift sentiment in the Chinese currency.
Chinese officials acknowledged on Friday the sweeping list of economic goals re-emphasised at the end of a key Communist Party meeting this week contained “many complex contradictions”, pointing to a bumpy road ahead for policy implementation.
“RMB markets were not excited at the conclusion of China’s Third Plenum,” said Chang Wei Liang, FX and credit strategist at DBS, adding that the offshore yuan is likely to consolidate around 7.25-7.30 per dollar.
Chinese leaders reiterated their economic policy goals on Thursday, from modernizing industry to expanding domestic demand and curbing debt and property sector risks, without detailing implementation steps.
The yuan has lost 0.22% this week and 2.4% this year. 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 yuan, and foreign investors stay away from its struggling stock market.
Meanwhile, the dollar was poised to snap a two-week losing streak on Friday as traders pondered the US rates outlook.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1315 per dollar, about 1,400 pips firmer than a Reuters’ estimate.
China’s yuan slips on economic weakness despite tight offshore funding
The PBOC’s smoothing measures will still play a determinant role in the dollar-yuan pair, analysts from HSBC said in a note.
The central bank has been gradually lowering its daily yuan official guidance in the past few months, well within market projections but with a bias suggesting it is allowing some depreciation, traders and analysts said.
While such a movement stalled this week, HSBC analysts said, “it is possible that the PBOC may slightly dial back its defensiveness again when the Plenum passes and allow the slow grind higher in USD-CNY fixing to resume.”
The spot yuan opened at 7.2626 per dollar and was last trading 40 pips weaker than the previous late session close at 7.2660 as of 0700 GMT, and 1.88% weaker than the midpoint.
American Dollar Exchange Rate