The offshore yuan remained little changed at around 7.21 per dollar, trading within a narrow range near two-month lows as investors continued to digest a mix of mixed economic signals from China.
Offshore yuan remains subdued
April’s retail sales growth decelerated and came in below market expectations, highlighting ongoing concerns about fragile consumer demand and cautious household spending amid economic uncertainties. Conversely, industrial output outperformed forecasts, though it slowed from the strong pace seen in March, suggesting that manufacturing activity remains a relative bright spot but is losing some momentum. Meanwhile, the urban unemployment rate edged down slightly, offering a modest indication of labor market stability in the face of broader economic challenges.
Market sentiment was also tempered by cautious commentary following recent trade discussions between China and the United States. Chinese officials described the talks as “good,” but provided little clarity on next steps, leaving investors uncertain about the durability and scope of the current 90-day tariff truce. Adding to the uncertainty, former President Trump hinted at a potential phone call with President Xi Jinping, fueling speculation about the future course of US-China relations.
Support from weak dollar
Despite these mixed factors, the yuan found some support from a weakening US dollar, which softened following the unexpected downgrade of the US credit rating and growing market expectations that the Federal Reserve could ease monetary policy further with rate cuts later this year. Looking ahead, investors are now focusing on the People’s Bank of China’s upcoming monetary policy decisions, with market consensus anticipating a 10 basis point cut each to both the one-year and five-year loan prime rates. Such moves are expected to aim at stimulating domestic borrowing and investment, supporting economic growth amid a complex external environment.
