Chinese Yuan Weakens on Deflationary Pressures

The offshore yuan depreciated toward 7.20 per dollar, sliding to its lowest levels in three weeks as data pointed to persistent inflationary pressures in China, suggesting the country’s economy continued to suffer from weak domestic demand.

Data released over the weekend showed that consumer prices in the country fell 0.5% YoY in November, accelerating from a 0.2% drop in October and coming in worse than the 0.1% forecast. Producer prices also fell 3% last month, marking the 14th straight month of PPI decline and the quickest since August. Investors now look ahead to more economic data this week and loan prime rate decisions from China’s central bank next week for further guidance.

Externally, the yuan also came under pressure from a general dollar strength, as stronger-than-expected US jobs data countered the view that the Federal Reserve could start cutting rates as early as March 2024.