July, 13(Agencies) — China’s yuan slipped slightly against the dollar on Thursday, as the country’s export growth surprised investors to the downside, but analysts said further currency weakness was expected to be limited.
China’s exports fell more than expected in June year-on-year, while imports also contracted, in the worst showing for outbound shipments from the world’s second-largest economy in three years.
Prior to the market’s open, the People’s Bank of China set the midpoint rate at 7.1527 per US dollar, 238 pips firmer than the previous fix 7.1765.
The spot yuan opened at 7.1680 per dollar and was changing hands at 7.1687 at midday, 37 pips weaker than the previous late session close.
Despite the strengthening of yuan against the dollar in recent days, the yuan has underperformed amid the US dollar’s retreat, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets. The trade-weighted CFETS Yuan Basket Index dropped to 96.22, the lowest level since early 2021.
The June import contraction confirmed weakening growth momentum through the second quarter, Tan said.
Despite the trade data weakness, traders and analysts believe further downside in yuan is limited by China’s smoothing measures such as setting stronger fixes and potential stimulus to be announced at the July Politburo meeting
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