China’s yuan edged lower against the US dollar on Monday, pressured by weaker-than-expected economic data and a scramble among corporates to buy cheaper dollars following a surprise downgrade of the US government’s credit rating.
Retail sales in China rose 5.1% in April, down from March’s 5.9% increase and missing forecasts of 5.5%, as ongoing trade tensions continued to dampen economic momentum. Meanwhile, new home prices remained largely unchanged for the second consecutive month, signaling persistent softness in the property sector despite government efforts to stabilize the market.
“The recent trade truce between the United States and China has given the yuan some breathing space, but growth pressures remain,” said Barclays analysts. The two largest global economies agreed to roll back most of their April tariffs in an effort to ease trade tensions.
By 0342 GMT, the onshore yuan slipped 0.08% to 7.2159 per dollar, while its offshore counterpart declined about 0.04% to 7.2163 in Asian trade. This follows a six-month peak of 7.1855 touched last week after the trade truce.
Currency traders noted that the recent dollar weakness, triggered by Moody’s downgrade of the US sovereign credit rating, prompted Hong Kong-listed Chinese companies to fulfill their foreign exchange needs for dividend payments to overseas shareholders, typically occurring between May and August.
Before the market opened, the People’s Bank of China (PBOC) set the yuan’s midpoint rate at 7.1916 per dollar—its strongest level since April 3 and notably firmer than market estimates.
Barclays analysts observed that the narrowing gap between the official USD/CNY fixing and market estimates, along with a small CNH-CNY basis, suggests limited directional pressure or stress on the Chinese currency. The PBOC appears comfortable allowing the yuan to hover around the 7.20 level for now.
Maintaining yuan stability remains a key goal for policymakers. Christopher Wong, FX strategist at OCBC Bank, warned that any sharp yuan appreciation might prompt exporters to offload their dollar holdings, potentially causing excessive volatility—something Chinese authorities want to avoid.
