SHANGHAI: The yuan fell against the dollar in China on Monday and investors were cautious, with key economic data releases approaching and the proceedings within Sino-US trade negotiations remaining uncertain.
The onshore yuan depreciated 0.13% to trade at 7.2960 per dollar, while the slightly off-shore traded yuan declined by 0.09% to 7.2948, both demonstrating that punitive tariffs and geopolitical tensions are uppermost in the minds of investors over the economic outlook.
Traders are carefully watching the development of the troubled trade relationship between the United States and China, especially post-US President Donald Trump imposing a 145% tariff on Chinese imports.
To further increase investor skepticism, US Treasury Secretary Scott Bessent would neither affirm nor deny that any trade negotiations were still ongoing, in spite of Trump's claims of progress.
Focus shifts to China's April manufacturing PMI, due here on Wednesday, which could give early evidence that the economy is beginning to feel the stress of the implemented tariffs. Analysts said their readings would also assist in deciding when to shift monetary policy and what valuation strategies to take up for the yuan.
Earlier in the day, the People’s Bank of China (PBOC) set the yuan’s midpoint at 7.2043 to the dollar, the strongest since April 8 and considerably stronger than the model forecast. Analysts interpreted this as an attempt to stabilize the currency while maintaining a lot of freedom to absorb external shocks.
With mild weakening against the dollar, the yuan has lost approximately 5% against a basket of currencies of its other trading partners in 2023, according to the CFETS index. Economists, including at Goldman Sachs, have anticipated a gradual depreciation to 7.35 by year-end in support of China's export competitiveness.
Zou Lan, deputy governor of China's central bank, reaffirmed that the bank will pursue moderately loose monetary policy aims while stabilizing the yuan against external challenges.
[Source Credit: Business Recorder]
