Offshore Yuan Gains Amid China Data

The offshore yuan weakened past 7.25 per dollar, returning to its lowest level in over three months, pressured by a stronger U.S. dollar following recent inflation data and comments from the Federal Reserve.

The dollar gained further on "Trump trades," with markets betting that a potential second Trump administration could foster robust growth and higher inflation, limiting the Fed's capacity to lower interest rates.

Meanwhile, in China, new loans from banks declined sharply in October, falling short of market expectations.

Data over the weekend also showed that China’s consumer inflation for October hit a four-month low, missing market forecasts, while producer prices extended its 25-month deflationary trend, marking the steepest decline since November 2023.

Traders are now looking ahead to key economic data this week, including industrial production, retail sales, and the unemployment rate, as well as the PBOC's decision on the one-year Medium-Term Lending Facility (MLF) rate.

The offshore yuan rose to around 7.23 per dollar, rebounding from an over three-month low in the previous session and ending a three-session losing streak.

This recovery was mainly supported by a stronger-than-expected midpoint guidance from Chinese authorities, signaling their growing concern over the currency's recent rapid depreciation.

The People’s Bank of China set the yuan’s midpoint rate at 7.1991 per dollar, its weakest level since September 2023.

However, this was still 314 pips stronger than expected, marking the largest deviation since August. Meanwhile, Chinese banks issued only CNY 500 billion in new loans for October on Monday, a sharp decline from September's total and below the forecasted CNY 700 billion.

Weekend data also showed that China's consumer inflation for October hit a four-month low, falling short of market expectations, while producer prices continued its deflationary trend for the 25th month, marking the steepest drop since November 2023.

USDCNY increased to a 14-week high of 7.24.

Over the past 4 weeks, US Dollar Chinese Yuan gained 2.13%, and in the last 12 months, it decreased 0.65%.

The offshore yuan slid past 7.24 per dollar, hitting over a three-month low, pressured by a strong U.S. dollar as "Trump trades" continued to drive financial markets.

The yuan’s depreciation was further exacerbated by weak Chinese economic data data and an underwhelming stimulus package.

On Monday, Chinese banks extended only CNY 500 billion in new loans for October, a steep drop from September's figures and well below market expectations.

China also reported over the weekend that October's consumer inflation hit a four-month low, coming in below forecasts, while producer prices continued a 25-month deflationary trend, marking the steepest drop since November 2023.

Moreover, China announced over the weekend a CNY 10 trillion debt package, aimed at easing local government financial pressures and supporting growth.

However, with no direct stimulus included, the measures left investors unsatisfied.