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Chinese Yuan Surges Despite Data Falling Short of Expectations

September 16, 2019 at 18:20 by Andrew Moran

Chinese yuan denominationsThe Chinese yuan is strengthening against major currency rivals to kick off the trading week, despite recent economic data falling short of expectations. Investors seem to be more bullish on US-China trade optimism, partially ignoring the latest industrial and retail sales numbers.

According to the National Bureau of Statistics, value-added industrial production climbed 4.4% in August from the same time a year ago, down from the 4.8% jump in July. This is below the market forecast of 5.2% and represents the smallest gain in industrial output since February 2002. Output growth was the slowest in manufacturing, mining, and utilities. But there were better-than-expected increases in power equipment, transport equipment, chemicals, and textiles.

Retail sales 7.5% year-on-year last month, down from 7.6% in July. This also was lower than the median estimate of 7.9%. Automobiles, crude oil, and jewelry sales experienced a contraction, and furniture receipts grew at a slower pace. Home appliances, office supplies, cosmetics, and building materials expanded at a faster rate.

In the January-to-August period, fixed-asset investment rose 5.5% from a year ago. Investors had penciled in 5.6% growth.

Ostensibly, traders were more focused on the upcoming US-China trade negotiations, searching for signals of a possible conclusion. So far, both sides have extended olive branches and showed signs of good faith. The White House postponed additional tariffs on Chinese goods by two weeks until October 15, while China purchased US soybeans and exempted American agriculture from higher tariffs.

Meanwhile, global financial markets were dealt with a troubling blow after Chinese Premier Li Keqiang revealed that it will be “very difficult” for the world’s second-largest economy to grow at an annual pace of 6% or more under today’s circumstances. While China is aiming for gross domestic product (GDP) growth of 6% to 6.5%, the latest GDP numbers suggest GDP is expanding at its slowest rate in 27 years.

The USD/CNY currency pair fell 0.17% to 7.0673, from an opening of 7.0795, at 18:10 GMT on Monday. The EUR/CNY tumbled 0.85% to 7.7730, from an opening of 7.8982.

If you have any questions, comments, or opinions regarding the Chinese Yuan, feel free to post them using the commentary form below.

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