HONG KONG: China’s yuan eased on Friday as the US dollar rebounded and a flurry of domestic data pointed to weaker retail sales and investment, suggesting the world’s second-largest economy is still struggling for traction.
The spot yuan opened at 7.2300 per dollar and was changing hands at 7.2267 at midday, 68 pips weaker than the previous late session close and 1.72% away from the midpoint.
The greenback rose overnight after data showed US import prices increased 0.9% last month, an increase that raised concerns the Federal Reserve could delay plans to cut interest rates.
Moreover, most Chinese data released during morning trade disappointed to the downside.
Factory output topped forecasts in April, helped by improving external demand, but retail sales unexpectedly slowed and the property sector remained a heavy drag on the economy, piling pressure on Beijing to do more to support growth.
Separate data showed China’s new home prices fell at the fastest monthly pace in over nine years.
The market is closely watching a reported high profile meeting to be held later on Friday by the State Council to address property market issues, including a proposal to clear excess housing inventory.
Prior to the market open, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1045 per US dollar prior to market open, weaker than the previous fix 7.102.
China’s yuan firmer against dollar
The yuan has lost 1.8% against the dollar so far this year, pressured by its relatively low yields versus other currencies and the struggling economy.
Meanwhile, China’s finance ministry auctioned the first batch of its special treasury bonds on Friday to finance a long-awaited stimulus programme.
Given the lack of details on how government will help clear the housing inventory including the source of funding, “we remain cautious on the yuan,” Barclays analysts said in a note.
American Dollar Exchange Rate