Yuan hits one-week high despite slower export momentum

HONG KONG: China’s yuan hit a one-week high against the dollar on Monday, even as data showed the country’s export growth slowing while state banks were seen buying dollars on dips.

The yuan strengthened to as much as 7.1300 per dollar in the opening hour, the strongest in a week, before edging 0.04% lower to 7.1351 by 0255 GMT.

The offshore yuan traded at 7.132 yuan per dollar, down about 0.06% in Asian trade.

The currency’s appreciation momentum is easing with major banks potentially buying dollars at lows and domestic risk appetite weakening, CICC analysts wrote in a note.

“It could stay range-bound until we see meaningful improvement in domestic conditions alongside external tailwind” such as dollar weakness and increased capital inflows, they added.

China’s exports in August logged the slowest growth in six months, data showed on Monday, weighed down by weaker shipments to the US as a temporary boost from the tariff truce faded.

Import growth also slowed to 1.3% from a month earlier, suggesting domestic demand remains tepid.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1029 per dollar, its strongest since November 6, 2024, and 288 pips firmer than a Reuters’ estimate.

The spot yuan is allowed to trade a maximum of 2% on either side of the fixed midpoint each day. Based on Monday’s official guidance, the yuan is allowed to drop as far as 7.2450.

The central bank has been steadily letting its daily yuan guidance firm since May, a move traders and analysts say signals it is allowing some appreciation.

The continued lower fixings suggests “a policy push behind the move, likely reflecting pre-emptive management to ease future appreciation pressures especially after the expected Fed rate cuts later this year”, Goldman Sachs said in a note.

“In the absence of new catalysts, we expect the fixing to hover near 7.10, with onshore and offshore spot converging towards that level,” they wrote.

The dollar’s six-currency index was steady after falling sharply on Friday on data that showed further cracks in the US labour market.

Traders have now fully priced in a 25-basis-point cut later this month with an 8% chance of a jumbo 50-bp rate cut, the CME FedWatch tool showed.

They are anticipating 68 basis points of easing by the end of this year.