An employee counts 100-yuan notes at a bank in Beijing on November 14, 2024. (Photo by ADEK BERRY/ AFP)
HONG KONG: China's yuan held near a 13-month low against the dollar on Tuesday, as traders anticipated additional easing measures following disappointing economic data, while focus has also shifted to the Federal Reserve's rate decision this week.
By 0605 GMT, the yuan was little changed at 7.2844 to the dollar after trading in a range of 7.2756 to 7.2870.
The spot yuan CNY=CFXS opened at 7.2850 per dollar and was last trading 8 pips lower than the previous late session close, which was the lowest level since November 2023.
The offshore yuan traded at 7.2922 yuan per dollar, down about 0.03% in Asian trade.
Chinese government 10-year bond yields rose 0.5 basis points to 1.73% to recover from a record low.
Chinese leaders agreed to raise the budget deficit to 4% of gross domestic product next year, its highest on record, while maintaining an economic growth target of around 5%, Reuters reported on Tuesday, citing two sources with knowledge of the matter.
Analysts said the move was within expectations, as the deficit needed to be expanded to help resolve local government debt issues.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1891 per dollar, the weakest in a week and 951 pips firmer than a Reuters estimate.
Economic data released this week showed an unexpected weakness in consumption, threatening to drag on the economy amid Trump's looming tariff threats and indicating Beijing's policy efforts to stimulate growth this year have yet to turn the corner.
"The November economic data continue to indicate weak aggregate demand despite intensified policy easing," analysts at Bank of America said in a note on Monday.
The PBOC could deliver a required reserve ratio (RRR) cut ahead of Lunar New Year next month, with extending subsidies also on the agenda, they added.
At last week's Central Economic Work Conference, a closely watched agenda-setting meeting, China's top leaders pledged to raise the budget deficit, issue more debt and make boosting consumption a top priority.
The remarks echoed commitments made by a meeting of top Communist Party officials, the Politburo, earlier this month, which endorsed an "appropriately loose" monetary policy in the first easing of its stance in 14 years.
The yuan is down 0.6% against the dollar this month, and 2.5% weaker this year. It has been under pressure since early 2023 as domestic woes around a moribund property sector, anaemic consumption and falling yields drive capital flows out of yuan.
China's capital markets suffered a record outflow of $45.7 billion in November, according to data from its foreign exchange regulator released late on Monday.
Meanwhile, the U.S. dollar held firm and near recent peaks on Tuesday on the eve of an expected interest rate cut in the United States, as traders ratchet long-term rate assumptions higher.
The Federal Reserve will announce its interest rate decision on Wednesday and interest rate futures imply a 94% chance of a 25 basis point cut. - Reuters
