Chinese Yuan Weakens Despite Bullish Manufacturing Data

Apr 02,2019 20:45   Source:Earnforex

Various yuan banknotesThe Chinese yuan is weakening against some of its currency rivals on Tuesday, despite a myriad of data that suggests the economy might be rebounding as the year progresses. Should investors be optimistic, or should they maintain a modicum of skepticism?

Last month, the manufacturing sector experienced a surprise return to growth, buoyed by the federal government’s efforts to stimulate the economy. The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) increased to 50.8 in March, beating the median estimate of 49.9. This represents an eight-month high.

The results of the private sector survey come as the country’s official PMI data found that manufacturing activity rose to 50.5 last month, up from 49.2 in February, which is a six-month high.

Last week, it was reported that industrial profits skyrocketed 10.3% in February, beating market forecasts of a 14% decline.

Could this be a sign that the Chinese economy will grow at a rapid pace? A new forecast from ING says that the economy will grow 6.3%, citing a fiscal stimulus and monetary accommodation. The cited figure is higher than the median estimates of 6%.

Aside from the trade war initiated by the US, external pressure from other countries is also growing. China faces an increasingly tough external political climate as it grows in terms of economic ability, international influence, and its technology development ability.”

Overall, we believe that despite the trade tension, China can grow by 6.3%.

The US has also experienced better manufacturing figures as the Institute for Supply Management (ISM)’s manufacturing index surged to 55.3% in March.

Investors will not have a whole lot to look at because the data calendar is light. Over the next week, traders will only get an inflation report, foreign exchange reserves, and trade numbers.

Meanwhile, investors are once again hopeful that the US and China are on the cusp of a new trade agreement. A US delegation is in Beijing this week to speak with their Chinese counterparts. For the next several days, analysts will be anticipating clear signals of a breakthrough between the world’s two largest economies.

The USD/CNY currency pair rose 0.18% to 6.7233, from an opening of 6.7115, at 19:23 GMT on Tuesday. The EUR/CNY jumped 0.06% to 7.5277, from an opening of 7.5233.


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