China's yuan inches lower on weak industrial profit data
HONG KONG: China's yuan slipped from a seven-month high against the dollar on Friday, weighed down by disappointing industrial profit data, but progress in U.S.-China trade negotiations eased some of the pressure.
Data showed China's industrial profits swung back into sharp decline in May from a year earlier, as factory activity slowed in the face of broader economic stress and a fragile trade truce with the United States.
By 0345 GMT, the yuan was 0.04% lower at 7.1702 to the dollar after trading in a range of 7.1692 to 7.1747.
In the previous session, the yuan strengthened to a high of 7.1565 per dollar, the strongest since November 8.
Prior to the market opening, the People's Bank of China set the midpoint rate at 7.1627 per dollar, 144 pips firmer than a Reuters' estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
Separately, China's trade-weighted CFETS yuan basket index fell to 95.36 in early trade, its lowest level since January 4, 2021, based on Reuters estimates.
Despite China's cloudy macroeconomic outlook, the yuan found some support thanks to a weakening U.S. dollar amid growing market concerns about the Federal Reserve's independence, and some silver linings in the Sino-U.S. trade war.
The yuan is up 0.4% against the dollar this month, and 1.8% firmer this year.
The United States reached an agreement with China on how to expedite rare earth shipments to the U.S., a White House official said on Thursday.
U.S. President Donald Trump earlier confirmed the United States had signed a trade deal with China.
'Such an agreement is not a comprehensive trade deal, but it is still important to preserve the US-China trade truce and limit tariff increases. Despite uncertainty over negotiations,' DBS analysts said in a note.
Sentiment towards the yuan can improve durably given a renewed official agreement, they said, expecting the offshore yuan to strengthen against the dollar towards 7.15.
The offshore yuan traded at 7.1672 yuan per dollar, down about 0.04% in Asian trade.
The dollar's six-currency index was 0.107% lower at 97.27.
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