China's yuan slides to seven-month low on weak economic data
By Summer Zhen
HONG KONG, July 3 (Reuters) -China's yuan skidded to a seven-month low against the dollar on Wednesday on weak economic data and as the central bank nudged the currency's trading range a little bit lower.
At 0410 GMT, the yuan CNY=CFXS was down about 0.03% at 7.2733 and had traded as low as 7.2736, the weaker end of its daily trading band.
The yuan is down 2.4% on the U.S. dollar this year as China's economic recovery has disappointed and rock-bottom bond yields have driven money away and into higher yielding currencies.
The Caixin/S&P Global services purchasing managers' index (PMI) released on Wednesday fell to 51.2 from 54.0 in May, marking the lowest reading since October 2023.
Despite a small fall for the dollar overnight, the People's Bank of China (PBOC) fixed the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1312 per dollar, its weakest since Nov. 21, 2023.
"Market participants perceived PBOC's policy signal to unleash CNY depreciation pressure," said Mizuho currency strategist Ken Cheung in a note to clients.
"It appears that the PBOC is comfortable with the current pace of depreciation."
Analysts said a looming U.S. presidential election where both major party candidates are taking a tough stance on relations with China was also putting downward pressure on the currency.
President Joe Biden's administration has revoked eight licences this year that had allowed some companies to ship goods to Chinese telecoms equipment giant Huawei, according to a document first reported by Reuters. The U.S. also added six companies to its trade restriction list on Tuesday, including four for their links to the training of China's military forces.
The second half is likely to bring geopolitical risks facing the Chinese yuan to the fore more forcefully as the U.S. election nears, Luis Oganes, head of global macro research at JPMorgan, wrote in a note.
Key onshore vs offshore levels:
Overnight dollar/yuan swap onshore -15.50 pips vs. offshore -15.50
Three-month SHIBOR SHIBOR= 1.9 % vs. 3-month CNH HIBOR 3 %
LEVELS AT 03:19 GMT
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan <CNY=CFXS | 7.2734 | -0.03 | -2.36 | 7.271 | 7.2736 |
Offshore yuan spot CNH=D3 | 7.3094 | -0.04 | -2.54 | 7.3069 | 7.3114 |
Reporting by Summer Zhen; Editing by Jamie Freed
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