China's yuan eases after Fed's outsized rate cut
SHANGHAI, Sept 19 (Reuters) -China's yuan eased slightly against the dollar in early trade on Thursday, reflecting broad strength of the U.S. dollar in global markets after the Federal Reserve's outsized interest rate reduction overnight.
Bounces in the dollar come after the U.S. central bank kicked off its monetary easing cycle with a larger-than-usual half-percentage-point reduction that Chair Jerome Powell said was meant to show policymakers' commitment to sustaining a low unemployment rate now that inflation has eased.
The onshore yuan CNY=CFXS was 0.42% lower at 7.1075 to the dollar by 0145 GMT, compared with the previous close of 7.0780.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.0983 per dollar, and 59 pips weaker than a Reuters' estimate.
"The yuan should continue to lag in recovery versus the rest of its peers because of China's economic fragility and the risk that a Trump victory might spur greater yuan volatility because of his tariff threats on China," Maybank analysts said in a note.
"Yuan should remain on the backfoot versus most other developed market (DM) peers in the medium term and another 5% fall in the trade-weighted index (TWI) from here into 2025 could happen."
A string of August economic data, including credit lending and activity indicators, surprised to the downside. Faltering Chinese economic activity has prompted global brokerages to scale back their 2024 China growth forecasts to below the government's official target of about 5%.
Reporting by Shanghai Newsroom; Editing by Stephen Coates
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
