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by The offshore yuan has recently slipped to 7.09 against the dollar, its weakest point in over a week. This drop extends a losing streak to six days during China’s National Day festivities.
The yuan’s decline is mainly due to the strengthening U.S. dollar, which has surged following positive economic data from the U.S. This robust data has reduced the likelihood of significant rate cuts by the Federal Reserve in the near term.
The USD/CNH chart below shows the currency pair’s price as of this writing.
USDCNH Analysis – 4-October-2024
Mixed Signals in Economic Data
At the start of this week, new figures were released showing a slight improvement in China’s manufacturing sector for September. This rebound from the six-month low seen in August was better than many had predicted.
However, not all news was positive, as the services sector recorded its weakest performance since January 2023, falling short of economic forecasts. A private survey added to the gloom, indicating the steepest decline in manufacturing since the start of the year and a marked deceleration in service sector growth, which was the slowest since September of the previous year.
New Measures to Bolster the Economy
In response to the economic downturn, the People’s Bank of China has taken a proactive step. Starting November 1, homeowners will have the opportunity to renegotiate the terms of their mortgages. This policy is part of a larger strategy aimed at revitalizing the economic landscape and providing relief to homeowners.
Conclusion: Navigating Economic Challenges
The yuan’s recent decline reflects broader economic pressures and mixed domestic data. While manufacturing shows signs of recovery, the services sector remains a concern.
The People’s Bank of China’s new initiative to renegotiate mortgage terms could provide much-needed support to the housing market and broader economy. Understanding these dynamics is essential for grasping the economic challenges and opportunities ahead.
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