Yuan falls for third day in a row in wake of weak mainland China trade data
Weak Chinese exports have also put downward pressure on the yen
The yuan fell for the third day in a row on Wednesday, with weak economic data leading to expectations the mainland authorities may come under more pressure to allow the currency to depreciate to help exports.
Offshore yuan traded in Hong Kong was quoted at 6.5182 per US dollar in early trade on Wednesday, weaker by 0.15 per cent from Tuesday, before bouncing back to 6.5155 at 10am. The yuan has depreciated 0.26 per cent against the greenback so far this week after rising 0.67 per cent against the US dollar last week.
The drop in exports has investors second-guessing themselves about the current risk rally
It has weakened after mainland China said on Monday that its exports had fallen 25.4 per cent year on year in US dollar terms last month, the biggest fall in seven years and worse than market expectations of about 14 per cent. That had currency traders expecting the yuan to be led lower to help boost exports.
“The China trade data, particularly the drop in exports has investors second-guessing themselves about the current risk rally,” senior OANDA FX trader Stephen Innes said. “Traders are still thinking higher on USD/CNH, so it does take much to swing conviction when the market sentiment remains fragile.”
Innes said the weak Chinese export data had also put downward pressure on the yen, which was trading at 112.56 against the US dollar on Wednesday morning, weaker that Tuesday’s low of 112.40.
“The stock market and oil price also decreased due to weakening risk sentiment,” he said. “The USD/JPY declined with the negative market. It could be difficult to change this risk sentiment. The weak dollar-yen and Nikkei will soften each other and the negative spiral is expected to continue.”
