Thursday, July 4, 2024 07:33 PM
China's yuan weakens amid US dollar surge and domestic challenges
- Yuan declines due to US dollar strength and sluggish domestic data
- Chinese property market pressures economy, new home prices drop significantly
- Policymakers face challenges in addressing housing inventory issues and economic pressures
Image Credits: brecorderChina's yuan weakens against the US dollar due to economic challenges, including property market pressures and sluggish domestic data. Policymakers face hurdles in addressing housing inventory issues.
China's yuan faced a decline on Friday as a result of a resurgence in the US dollar and disappointing domestic data reflecting sluggish retail sales and investment. The spot yuan opened at 7.2300 per dollar and stood at 7.2267 by midday, marking a 68-pip drop from the previous session and landing 1.72% below the midpoint.
The US dollar gained strength following a 0.9% increase in US import prices last month, sparking worries about potential delays in Federal Reserve interest rate cuts. Chinese data released earlier in the day presented a mixed picture, with factory output surpassing expectations in April, while retail sales unexpectedly slowed down and the property sector continued to exert pressure on the economy.
China witnessed the most significant monthly decline in new home prices in over nine years. Market observers are eagerly anticipating a high-level meeting by the State Council to tackle property market challenges, including strategies to reduce excess housing inventory.
Prior to the market opening, the People's Bank of China established the midpoint rate at 7.1045 per US dollar, which was weaker than the previous fix. The yuan has depreciated by 1.8% against the dollar this year, influenced by lower yields compared to other currencies and prevailing economic hurdles.
China's finance ministry recently conducted an auction of special treasury bonds to support a stimulus program. However, uncertainties persist regarding the government's approach to addressing housing inventory issues, prompting caution among analysts.
The global dollar index saw an increase, while the offshore yuan traded slightly below the onshore spot rate at 7.231 per dollar.
The fluctuations in China's yuan, driven by both external and internal factors, underscore the intricate dynamics of global currency markets. As policymakers navigate challenges such as property market imbalances and economic pressures, stakeholders remain vigilant for potential impacts on investment and trade flows.
