Yuan eases on weakest guidance in nearly 9 months

Yuan depreciation: Yuan depreciated against Dollar on Tuesday following People's Bank of China (PBOC) setting its weakest midpoint rate in nearly nine months. Trers are also awaiting key US inflation data and Chinese ecomic reports later in week.

PBOC set midpoint rate at 7.1479 per Dollar, its weakest since vember 2023. This rate was 281 pips stronger than a Reuters estimate.

At start of tring, Yuan was at 7.1780 per Dollar and was last seen at 7.1794 as of 0316 GMT, down 50 pips from previous close and 0.44 per cent weaker than midpoint rate.

Despite a 0.6 per cent gain against Dollar this month, supported by a rising Yen and unwinding of short positions following a surprise rate hike by Bank of Japan, Yuan remains 1.1 per cent weaker year-to-date. This decline is attributed to ongoing domestic challenges, including a struggling property sector, weak consumption, and volatile stock markets.

Market attention is focussed on upcoming US ecomic data, particularly July consumer price index (CPI), which could influence Federal Reserve's policy decisions and, in turn, affect yuan-dollar exchange rate. Kristina Hooper, Chief Global Market Strategist at Invesco, ted, “re are concerns that CPI data could impact expected Fed rate cut in September, but recent data suggests a continued disinflationary trend, including July jobs report.”

China will also release key ecomic data, including retail sales and industrial output, on Thursday.

Yen has stabilized after significant fluctuations last week, with movements in Chinese and Japanese currencies often showing strong correlation during market volatility.

Japan's Parliament is scheduled to hold a special session on August 23 to discuss central bank's recent interest rate hike, according to government sources.
China's sovereign bond yields fell on Tuesday after recent surges, ding complexity to PBOC's efforts to stabilize weakening yuan.

(With Reuters inputs)