Currency traders said household demand for foreign exchange has picked up ahead of the Labor Day holiday as many Chinese families might plan to travel abroad for the first time since border reopening in
January .
"Dollar demand is picking up," said a trader at a foreign bank.
The five-day long public holiday will start from Saturday.
Several currency traders also noted that the yuan weakness came as pressure on capital outflow rose through the Stock Connect scheme after the benchmark Shanghai Composite index declined for five trading days in a row to the lowest level since March 30. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8847 per dollar, 12 pips weaker than the previous fix of 6.8835. Separately, market participants said they would anxiously await the quarterly Politburo meeting this week, when a top decision-making body of the Communist Party discusses the economy. "While gross domestic product (GDP) rebounded in Q1, we expect the Politburo meeting to take a cautious view of growth given the lingering concerns about the sustainability of the housing and consumption recoveries," economists at Barclays said in a note, adding that macroeconomic policy was likely to stay accommodative to sustain the recovery. Sources told Reuters that China nudged banks this month to cut deposit interest rates further, the latest effort to channel vast savings into spending and more productive investment. Other market participants said the U.S. monetary tightening trajectory remained a key market focus, which could bring volatility to the dollar and other major currencies. Markets widely expect the Federal Reserve to raise rates by another 25 bps at next week's meeting, but they are seen pausing in June. (Reporting by Shanghai Newsroom; Editing by Sam Holmes and Nivedita Bhattacharjee)
