China's yuan dips as long-dated yield falls further amid deflation worries
SHANGHAI, Sept 9 (Reuters) -China's yuan dipped against the dollar on Monday as long-dated yields hit record lows after monthly inflation data added to economic worries and calls for fresh easing.
Meanwhile, the dollar index steadied after U.S. employment data last week reduced bets of aggressive rate cuts by the Federal Reserve.
The onshore yuan CNY=CFXS changed hands at 7.1060 per dollar around midday, down 0.23% from Friday's close.
China's consumer prices accelerated in August to the fastest pace in half a year, due to the higher costs of food from weather disruption, but was short of market expectations, data showed on Monday.
Meanwhile, producer price deflation worsened, stoking expectations of further easing from authorities to stimulate growth.
In unusually strong comments, China's ex-central bank governor Yi Gang urged efforts to fight deflationary pressure at the Bund Summit in Shanghai last week.
"Looking ahead, following the anticipated first Fed rate cut in September, there may be room for China to lower the RRR as a measure to support growth," Tommy Xie, head of Greater China research at OCBC, said in a client note.
"Should the Chinese economy slow further, we believe that Q4 could present a window for additional interest rate cuts."
The easing expectations helped push the yield on China's 30-year treasury bonds CN30YT=RR below 2.30% to a record low in morning trade, despite warning signals from China's central bank against bond bulls.
Lower Chinese yields would widen the interest rate gap with the U.S., adding depreciation pressure on the yuan.
Meanwhile, the dollar index =USD steadied on Monday, after last week's U.S. employment data showed the labor market was not falling off the cliff to warrant a half-point interest rate cut from the Federal Reserve this month.
"Fed officials speaking last week didn't appear to have any appetite for a 50bp cut to start the easing cycle," ANZ Research said in a note.
"These data reduce the likelihood of the Fed starting the easing cycle in a forceful manner."
The offshore yuan traded at 7.1073 yuan per dollar CNH=, down about 0.18% in Asian trade.
LEVELS AT 03:25 GMT GMT | |||||
INSTRUMENT | CURRENT vs USD | UP/DOWN(-) VS. PREVIOUS CLOSE % | % CHANGE YR-TO-DATE | DAY'S HIGH | DAY'S LOW |
Spot yuan <CNY=CFXS | 7.1072 | -0.24 | -0.07 | 7.105 | 7.112 |
Offshore yuan spot CNH=D3 | 7.1087 | -0.18 | 0.25 | 7.0975 | 7.1123 |
Reporting by Shanghai newsroom; Editing by Christopher Cushing
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
