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The Chinese Yuan fell by about 0.15% against the US dollar due to potential economic stimulus from China as inflation declined sharper to deflation which pressures the currencies’ value.

• Offshore yuan weakens to 6.95 per dollar, reaching its lowest level in over a week
• China’s consumer price index rose by 0.1% year-on-year in April, marking the slowest pace since early 2021
• Producer prices in China declined by 3.6% in April, the sharpest fall in nearly three years
• Sluggish trade data, including a contraction in imports and slower export growth, weighed on the currency
• Chinese manufacturing activity unexpectedly shrank in April, according to official and private surveys
• The data indicate the potential need for additional fiscal and monetary stimulus to bolster China’s economic recovery

The dollar exhibits strength against the Chinese Yuan as market participants anticipate potential economic stimulus measures, putting pressure on the Yuan. The dollar has been on an upward trajectory for four consecutive days against the Yuan, indicating a potential establishment of a balanced price range while targeting higher levels for possible absorption. The exchange rate is currently trading above the Quarter’s price range and has surpassed the developing value area for the month.

In the short-term perspective, there is a possibility of Yuan long buyers entering the market around prior swing levels from early May, which align with previous VWAP close levels.

2 Months Ago

Yesterday, the US released an inflation report showing a slight decrease to 4.9% from 5%, initially exerting downward pressure on the dollar and providing some support to the Yuan. However, the monthly perspective revealed a 0.4% increase in inflation, leading to a mixed market sentiment regarding the short- to long-term outlook. Calculations for the day indicate a bearish session with a mixed bias in US markets.

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