Yuan eases on disappointing trade data, eyes on US inflation numbers

SHANGHAI/SINGAPORE, May 9 (Reuters) - China's yuan eased against the dollar on Tuesday as signs of softening growth momentum in the world's second largest economy dented market sentiment, while investors also awaited a key U.S. inflation report. The U.S. consumer inflation report due on Wednesday is in focus globally, currency traders said, after Federal Reserve Chair Jerome Powell said last week that policy decisions will be "driven by incoming data," while signaling a likely pause in the rate hiking cycle. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.9255 per dollar, 97 pips weaker than the previous fix of 6.9158, and the softest since March 13. In the spot market, the onshore yuan opened at 6.9180 per dollar and weakened to a low of 6.9265 at one point, the softest level since April 28. By midday, it was changing hands at 6.9220, 65 pips weaker than the previous late session close.

Disappointing domestic trade data, released earlier in the day, showed that China's economic recovery remained patchy and added downside pressure on the yuan, currency traders said, after manufacturing activity unexpectedly contracted last month. China's imports contracted sharply in April, while exports grew at a slower pace, a double-whammy of pain for the economy from feeble domestic demand and cooling global growth.

"The downturn in Chinese exports may still have some way to run before bottoming out later this year," economists at Capital Economics said in a note. "The effect of higher interest rates in developed economies is still feeding through, and jitters in the global banking system have caused credit conditions to tighten, which will weigh on economic activity." Traders said market participants will continue to monitor economic data including inflation and credit lending for more clues on the health of the world's second largest economy. By midday, the global dollar index was up at 101.42 from the previous close of 101.377, while the offshore yuan was trading at 6.9249 per dollar.

The one-year forward value for the offshore yuan traded at 6.7547 per dollar, indicating a 2.52% appreciation within 12 months. The yuan market at 0411 GMT:

ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.9255 6.9158 -0.14% Spot yuan 6.922 6.9155 -0.09% Divergence from -0.05%
midpoint*
Spot change YTD -0.32% Spot change since 2005 19.57% revaluation

Key indexes:
Item Current Previous Change

Dollar index 101.42 101.377 0.0

*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET

Instrument Current Difference from onshore Offshore spot yuan 6.9249 -0.04%
*
Offshore 6.7567 2.50% non-deliverable
forwards
**

*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 Winni Zhou and Tom Westbrook Editing by Shri Navaratnam)

Messaging: winni.zhou.thomsonreuters.com@reuters.net))

Reuters

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Yuan eases on disappointing trade data, eyes on US inflation numbers

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