China's yuan about to get lashed by a wave of woes
Sept 10 (Reuters) -Already pummelled by intensifying deflationfears and the chance of exports slowing ahead, China's yuan faces another risk- the U.S. presidential election debate.
Augustinflation data disappointed on Monday, confirming persistently weak domestic demand. Core CPI eased to the lowest since 2021 and headline CPI undershot forecasts despite arise in food prices. Exacerbating the negativity, PPI also missed,sliding 1.8% annually, extending July's 0.8% fall.
On Friday, Yi Gang, former governor of the People's Bank of China, called for stronger measures to fight deflationary pressures as diminishing incomes crimp consumption. He said theGDP deflator, negativefor several quarters, needs to be returned to positive territory.
Failing to do sorisks a negative spiral of falling prices leading to lower spending as consumers postpone purchases anticipating cheaper products.
China's August exports rose 8.7% annually, overshooting forecasts, suggesting global consumption may help offset timid Chinese spending. But imports remained weak andincreasing trade tariffs ahead could influence FX policymakers to nudge the yuan weaker to aid exporters.
Tuesday's Trump-Harris debate is likely to trigger more yuan bearishness as the U.S. rivalry with Chinalooms large. Neither candidate will relent, and trade isn't their only target; the biomedical sector and advanced chip manufacturing are also in thecrosshairs.
USD/CNH will skew bullish if it clears its 23.6% Fibonacci level at 7.1221 and the 21-day moving average 7.1250, which would point it to the 50% retracement at 7.1875.
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Ewen Chew is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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