China's yuan flat, economic headwinds cap gains as market eyes annual financial forum
SHANGHAI: China's yuan steadied against the dollar on Monday, as a firmer-than-expected official guidance fix partially offset uncertainty around the broad economic outlook and currency vulnerability.
China's factory output growth hit a six-month low in May but retail sales picked up steam, while home prices fell and new bank lending rose less than expected.
The mixed bag of data fed into uncertainty around the economic outlook for the rest of the year, despite a trade truce between Washington and Beijing, analysts said.
'The US-China trade truce was not enough to prevent a broader loss of economic momentum last month,' Zichun Huang, China economist at Capital Economics, said in a note.
'With tariffs set to remain high, fiscal support waning and structural headwinds persisting, growth is likely to slow further this year.'
As of 0345 GMT, the onshore yuan was 0.01% higher at 7.1849 per dollar, while its offshore counterpart was up about 0.04% at 7.1860.
Investors, meanwhile, were anxiously awaiting more policy guidance from top financial officials, including from the central bank governor and securities regulator, who are scheduled to speak at the annual Lujiazui Forum later this week.
China's yuan slips as Middle East tensions rise
Market participants expect the yuan to continue trading sideways as they await fresh catalysts, either from the dollar's broader performance or any policy signals from the upcoming Lujiazui Forum, a foreign bank trader said.
The annual forum is scheduled for June 18-19 in Shanghai.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 7.1789 per dollar, and 65 pips firmer than a Reuters' estimate of 7.1854.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
In global markets, the dollar firmed against major currencies, underpinned by rising safe-haven bid on the back of persistently heightened Middle East tensions.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
3 hours ago
- Business Recorder
Fed keeps rates unchanged, sees two cuts in 2025 but less easing in later years
WASHINGTON: The Federal Reserve held interest rates steady on Wednesday and policymakers signaled borrowing costs are still likely to fall this year, but slowed the overall pace of expected future rate cuts in the face of estimated higher inflation flowing from the Trump administration's tariff plans. In new economic projections, policymakers sketched a modestly stagflationary picture of the U.S. economy, with economic growth slowing to 1.4% this year, unemployment rising to 4.5% by the end of this year, and inflation finishing 2025 at 3%, well above the current level. While policymakers still anticipate cutting rates by half a percentage point this year, as they projected in March and December, they slightly slowed the pace from there to a single quarter-percentage-point cut in each of 2026 and 2027 in a protracted fight to return inflation to the central bank's 2% target. Under the new projections, inflation remains elevated at 2.4% through 2026 before falling to 2.1% in 2027 amid largely stable unemployment. 'Uncertainty about the economic outlook has diminished but remains elevated,' the Fed said in its latest policy statement, a modification of language used in May, at a more turbulent moment in the trade debate, when it said that the risk of both higher inflation and higher unemployment had risen. Fed set to hold rates steady in the face of Trump pressure Those outcomes were both embedded in the new projections, the Fed's latest thinking about how President Donald Trump's suite of economic policies is expected to shape the economy this year. The 1.4% growth in output this year compares to the 1.7% rate seen in the last round of projections in March, and the 4.5% unemployment rate expected at the end of the year is up from the 4.4% projected in March. The rate as of May was 4.2% So far, however, 'the unemployment rate remains low, and labor market conditions remain solid,' the Fed said in its policy statement, which was approved unanimously. It did not mention the sudden outbreak of hostilities between Israel and Iran and the risk that conflict posed to global oil or other markets. Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 pm EDT (1830 GMT) and is likely to speak on the issue, as well as elaborate on the central bank's latest statement and economic projections. The rate projections from Fed officials for this year at least are in line with recent market expectations for a quarter-percentage-point rate reduction as soon as the Fed's September 16-17 meeting. The central bank continues to ignore Trump's call for immediate rate cuts, a move Fed officials feel would be counter to their effort to ensure inflation returns to their 2% target until key tariff changes are finalized and their effects are better understood. As Fed officials were meeting on Wednesday, Trump called Powell 'stupid' and said the policy rate should be slashed in half, the type of move usually reserved for severe economic emergencies. The Fed's current policy rate was set in the current 4.25%-4.50% range in December, and policymakers have been reluctant to commit to a timeline for further cuts given the volatility of U.S. trade policy, and the difficulty of estimating how the burden of higher import taxes will be spread among consumers, importers, and producing nations.
Business Recorder
5 hours ago
- Business Recorder
European shares fall as Middle East tensions weigh; eyes on Fed decision
European shares declined on Wednesday as investors awaited the Federal Reserve's monetary policy decision, with ongoing tensions in the Middle East adding to market uncertainty. The pan-European STOXX 600 index closed 0.4% down, at a near one-month low. The hostilities between Iran and Israel extended to a sixth day, with fears of a more direct U.S. involvement after President Donald Trump asked for Iran's 'unconditional surrender'. However, Iranian Supreme Leader Ayatollah Ali Khamenei rejected Trump's demand for surrender. Defence stocks were among the biggest gainers, with the sector up 0.6%. Traders also stayed away from risk assets ahead of the Federal Reserve's policy meeting at 1800 GMT, where officials are widely expected to hold interest rates steady. Investors will closely watch policymakers' comments for signals on how the U.S. central bank plans to navigate an uncertain trade environment. 'Rising geopolitical and trade uncertainties mean the Fed's growth and inflation forecasts may lack precision.', said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. European shares slide as Israel-Iran conflict shows no sign of cooling The Fed faces additional challenges from potential inflation risks stemming from the escalating Middle East crisis. As the July 8 tariff-pause deadline approaches, many countries, including the EU are scrambling to strike a deal with Washington. European Commission President Ursula von der Leyen was still aiming to reach a deal by July 9. The only formal deal signed was the finalization of the U.S.-UK agreement announced last month. Other major bourses indexes were largely mixed. London's FTSE 100 closed up 0.1% after data showed that British inflation eased as expected in May. Investors are now eyeing the Bank of England's rate decision on Thursday. 'With services inflation still elevated… the BoE looks nailed on to keep rates unchanged,' said Ruth Gregory, deputy chief UK economist at Capital Economics. Sweden's central bank cut its key interest rate to 2.00% from 2.25% as expected. Still, Stockholm's benchmark index dropped 0.1%. The healthcare sector was the biggest drag on the benchmark index, weighed down by a 1% drop by heavyweight Novo Nordisk. A U.S. judge upheld the U.S. Food and Drug Administration's decision to remove the pharma giant's blockbuster drugs Ozempic and Wegovy from the drug shortage list. Barclays forecasts a year-end 2026 target of 620 for the STOXX 600, citing Germany's stimulus measures and rate cuts as key drivers for this optimistic outlook. French outsourcing firm TP dropped 13.6% to the bottom of STOXX 600 after announcing new medium-term targets. Gerresheimer rose 6.3% after the German medical packaging maker said it was informed KPS Capital Partners was still in talks with Warburg Pincus on a potential joint takeover bid.
Business Recorder
7 hours ago
- Business Recorder
Wheat up 2-3 cents, corn down 1-up 1, soy down 1-2
CHICAGO: The following are U.S. expectations for the resumption of grain and soy complex trading at the Chicago Board of Trade at 8:30 a.m. CDT (1330 GMT) on Wednesday. Wheat - Up 2 to 3 cents per bushel CBOT wheat was buoyed by a slower than average U.S. winter wheat harvest, which reached 10% completion compared with a five-year average of 16%. Farm office FranceAgriMer has increased its forecast for French soft wheat exports within and outside the European Union in 2024/25, but the EU's biggest grain producer is still on course for its worst wheat export campaign this century after a rain-hit harvest. One of Russia's largest grain-producing regions, Krasnodar, has declared a state of agricultural emergency in eight drought-hit municipalities. CBOT July soft red winter wheat was last 3 cents to $5.52 per bushel. K.C. July hard red winter wheat was last up 3-3/4 cents at $5.51-1/2 per bushel, and Minneapolis July spring wheat rose 4-1/2 cents to $6.35-1/2 per bushel. Jordan gets 6 participants in 120,000 tons wheat tender Corn - Down 1 cent to up 1 cent per bushel CBOT corn traded on both sides unchanged, though it received some support from uncertainty over crop weather in the U.S. Midwest. CBOT July corn fell 1/2 cent to $4.31 per bushel. Soybeans - Down 1 to 2 cents per bushel CBOT soybeans eased on Wednesday as traders booked profits after a three-day price rally driven by strength in soyoil and the broader energy market, with continuing tariff uncertainty also pressuring prices. Support for agricultural commodities such as soybeans and corn has been underpinned by rising energy prices, fueled by escalating tensions between Israel and Iran. Higher crude oil prices improve the competitiveness of soyoil and corn as biofuel feedstocks. July soybeans were last down 1-3/4 cents to $10.72-1/4 per bushel.
