China’s Yuan is poised for its third consecutive weekly decline against the strengthening US Dollar, reflecting a broader trend despite a relatively flat performance on Friday. At 04:00 GMT, the onshore spot Yuan traded around 7.1960, showing minimal change from the previous session close.
The People’s Bank of China (PBOC) set a stronger midpoint rate in an effort to control USD/CNY around the 7.20 level. Analysts, such as Alvin Tan from RBC Capital Markets, anticipate potential upward movement beyond this level in the near future.
Throughout the week, the Yuan has depreciated by approximately 0.4 percent against the Dollar, marking a three-week losing streak. Economic challenges within China, combined with reduced expectations of US rate cuts, have created headwinds for the Chinese currency.
Recent data on China’s economic and population trends underscore long-term challenges for the world’s second-largest economy. The Yuan’s decline is further influenced by a resurgent US Dollar, driven by traders scaling back expectations of early US rate cuts amid escalating geopolitical tensions.
Maybank notes that ongoing attacks in the Red Sea pose risks to global trade and supply chains, potentially contributing to inflation pressures. Chang Wei Liang, FX and Credit Strategist at DBS, attributes the greenback’s strength to resilient US economic data and the outperformance of US equities.
Despite the current challenges, Liang maintains optimism about the Yuan, expecting China to provide additional support to bolster its struggling economy. “We maintain a constructive outlook on the RMB amid the pipeline of stimulus,” he stated.
