USDCNH Analysis – 25-June-2024

USD/CNH—The offshore yuan fell to around 7.28 against the dollar after weak signals from the People’s Bank of China (PBoC) dampened investor mood. The PBoC set a new midpoint at 7.1225 per dollar, the lowest since November, indicating that the bank may let the yuan weaken slowly despite the U.S. dollar’s decreasing strength.

Yuan Weakens as Consumer Spending Drops

Starting in early 2023, the yuan has faced several domestic hurdles, including a slow-moving real estate market, reduced consumer spending, and lower yields, which have promoted capital flight.

Investors Eye U.S. and China Market Data

Investors are now turning their attention to forthcoming economic reports from both the U.S. and China. These include U.S. PCE inflation figures, China’s reports on industrial profits, and manufacturing and service sector PMIs.

Biden vs Trump Debate Highlights Week

Significant upcoming events, like the initial U.S. presidential debate between Joe Biden and Donald Trump on Thursday and the French elections on Sunday, are also drawing attention.

USDCNH Analysis – 25-June-2024

The offshore yuan is experiencing a downward trend, primarily influenced by internal and external factors. The People’s Bank of China has set the currency’s midpoint at a notably weak position, signaling a possible strategic devaluation amidst internal economic challenges.

Specifically, a sluggish property market and poor consumer spending are stalling economic momentum within China, compounded by lower investment yields driving capital to seek better returns elsewhere.

Externally, while the U.S. dollar shows signs of weakening, significant forthcoming U.S. economic data and political events could sway global currency dynamics, affecting the yuan. With important economic indicators and global events on the horizon, the offshore yuan’s movements will likely remain closely watched by investors, who anticipate fluctuations based on domestic economic health and international market reactions.

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