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Chinese Yuan Weakens Despite Slight Improvement in Data

September 30, 2019 at 19:14 by Andrew Moran

Chinese yuan note closup with a flowerThe Chinese yuan is weakening to start the trading week, despite a slight improvement in economic data. The yuan, which has been battered against most currency rivals, has slipped way beyond the 7 threshold, leaving analysts wondering if this is the point of no return between the greenback and the yuan. The only way the market will find out is next month in Washington.

According to the National Bureau of Statistics (NBS), the manufacturing purchasing managers’ index (PMI) rose to 49.8 in September, up from 49.5 in August. Although this is the fifth consecutive month of being in contraction territory, it does signal an improvement amid the ongoing US-China trade dispute.

Factory activity advanced the most in six months, while suppliers’ delivery time climbed the most since May. But stockpiles of finished products declined. Overall business sentiment has strengthened to a four-month high.

The NBS non-manufacturing PMI dipped from 53.8 in August to 53.7 in September and the Caixin manufacturing PMI rose from 50.4 in August to 51.4 in September.

On Friday, it was reported that the White House had been considering restricting US investment in the world’s second-largest economy. One of the moves would involve the removal of Chinese companies from US stock exchanges. The report was disputed by the Treasury Department, but Beijing did warn that “decoupling” of any kind between the two sides would result in instability in global financial markets.

Next month, US and China trade delegations will meet in Washington for negotiations. Investors are optimistic that they will progress trade discussions, mainly due to the nations showing signs of good faith.

Prior to the crucial meeting, the Caixin services and composite PMIs and foreign exchange reserves data will be released.

The USD/CNY currency pair surged 0.36% to 7.1484, from an opening of 7.1228, at 19:02 GMT on Monday. The EUR/CNY edged up 0.03% to 7.7948, from an opening of 7.7943.

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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