The yuan dropped to its lowest point since last Wednesday in early morning trade. The decline was in line with other Asian currencies after the U.S. dollar extended gains made on comments by U.S. regulators that the banking sector remained "sound and resilient".
Profits for China's industrial firms shrank 22.9% in the first two months this year from a year ago, as the factory sector struggles to claw its way out of the slump caused by COVID-related disruptions.
That followed a 4% drop in industrial profits for 2022 and suggests an uneven path to recovery for the economy. Retail sales for January-February showed stronger growth momentum.
"While the industrial profits data are quite negative, the yuan was more dragged down by the dollar's strength," said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.
"Historically, the market reacts more to economic data such as the purchasing managers' index" which is due out Friday, he said.
After opening at 6.8730 per dollar, spot yuan was changing hands at 6.8784 at midday, 105 pips weaker than the previous late session close and 0.10% away from the midpoint.
The People's Bank of China set the midpoint rate at 6.8714 per U.S. dollar prior to the market open, weaker than the previous fix of 6.8374. The spot rate is currently allowed to trade with a range 2% above or below the official fixing on any given day. The dollar index , which measures the currency against six rivals, was up 0.01% at 103.000, having gained 0.5% on Friday. Investors will be closely watching U.S. gross domestic product data for the last quarter of 2022 that is due out on Thursday, while core PCE CPI, the Fed-favoured inflation gauge, is slated for Friday.
Financial stocks experienced sharp moves throughout last week after the collapse of two U.S. lenders and last weekend's Swiss-government-orchestrated takeover of troubled Credit Suisse by rival UBS . "Any sign of further credit stress in the banking sector could quickly eclipse any signs of economic strength in the U.S. and continue to contribute to rate cut expectations this year," Maybank analysts said in a research note on Monday.
Offshore yuan was trading 0.02% weaker than
onshore spot at 6.8799 per dollar.
The one-year forward value for offshore yuan traded at 6.729 per dollar, indicating appreciation of roughly 2.24% within 12 months. The yuan market at 2:51AM GMT:
ONSHORE SPOT: Item Current Previous Change PBOC midpoint -0.49% 6.8714 6.8374
Spot yuan -0.15%
6.8784 6.8679
Divergence from
midpoint*
0.10%
Spot change YTD
0.31%
Spot change since 2005
revaluation 20.33%
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan
* -0.02%
6.8799
Offshore
non-deliverable 2.12%
forwards 6.7285
**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint. .
(Reporting by Georgina Lee; Editing by Edwina Gibbs)
