Chinese yuan hits eight-month low as commodities currencies continue slide
By Summer Zhen
HONG KONG, July 24 (Reuters) -China's yuan slipped to its lowest point in more than eight months on Wednesday as commodities-linked currencies broadly lost further ground on a bleak outlook for Chinese demand.
Funding conditions remained tight offshore CNHTN=, however, making it costly for investors to short the yuan and limiting yuan losses, market participants said.
As of 0324 GMT, the yuan CNY=CFXS was 0.01% lower at 7.2756 to the dollar. It traded between 7.2700 and 7.2770 during the morning.
Over the past two weeks, China-linked currencies have tracked a pullback in commodity prices while the U.S. dollar has also been supported as traders wait on crucial growth and inflation readings for the U.S. economy.
"The dollar remains quite a strong currency, our forecast is the dollar to grind higher against RMB from current levels, even after the Fed starts to cut," said Joey Chew, head of Asia FX research at HSBC.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a 2% band, at 7.1358 per dollar. That was its weakest since November 2023 although it was still 1,437 pips firmer than a Reuters' estimate.
The central bank has been gradually lowering its daily yuan official guidance with a bias suggesting it is allowing some depreciation, traders and analysts said.
Spot yuan CNY=CFXS opened at 7.2700 per dollar and was last trading 9 pips lower than the previous late session close and 1.96% weaker than the midpoint.
The yuan is down 0.1% against the dollar this month, and 2.4% weaker this year. It has been under pressure since early 2023, hurt by a moribund Chinese property sector, anaemic consumption and falling yields.
More recently, few catalysts from the long-awaited Third Plenum's policy updates have also hurt sentiment towards the yuan and Chinese stocks.
BofA Securities analysts said China's rate cuts this week were a concession that monetary easing is needed to support growth.
"Our expectations for CNY appreciation are pushed back to 2025," they said.
Offshore yuan traded at 7.287 yuan per dollar CNH=, up about 0.03% in Asian trade.
The dollar's index =USD was flat at 104.48.
Key onshore vs offshore levels:
Overnight dollar/yuan swap onshore -7.85 pips vs. offshore -7.85
Three-month SHIBOR SHIBOR= 1.9 % vs. 3-month CNH HIBOR 3.2 %
LEVELS AT 03:23 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 | 7.2756 | -0.01 | -2.39 | 7.27 | 7.277 |
Offshore yuan spot CNH=D3 | 7.2871 | 0.03 | -2.22 | 7.2854 | 7.2915 |
Reporting by Summer Zhen; Editing by Tom Westbrook and Edwina Gibbs
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