China trade data weaker than expected; Yuan continues to fall as US dollar hits 7-month high

China September exports slump 10pc in September, imports down 1.9pc

PUBLISHED : Thursday, 13 October, 2016, 11:18am
UPDATED : Thursday, 13 October, 2016, 12:55pm

The Chinese yuan resumed its depreciation path after the minutes of the Federal Reserve’s FOMC September meeting signalled a US interest rise in December which pushed the US dollar to a seven-month high.

China also released weakened trading data for September on Thursday morning, which missed market expectations.

Exports slumped 10 per cent year on year, much worse than the estimates of a 3.3 per cent fall in a poll by Bloomberg. Imports fell 1.9 per cent year on year, compared with a forecasted 0.6 per cent rise.

The onshore yuan in Shanghai dipped 0.08 per cent or 56 basis points to 6.7236 against the US dollar at 10am, and at one stage hit 6.7291 per dollar, a fresh low since September 2010. The offshore yuan also retreated from small gains on Wednesday, down 0.12 per cent or 84 pips to 6.7330, which is nearing its January low of January, 6.7511.

The fall came as the People’s Bank of China continued to set the yuan reference point weaker amid a new round of US dollar strength. The fixing was set at 6.7296 against the US dollar, down 38 basis points or 0.06 per cent than on Wednesday. The central bank has weakened the fixing for eight days in a row, leading it to the fresh low in more than six years.

Thomas Shik, Hang Seng Bank acting chief economist, said the yuan’s downside slide was mainly caused by the US dollar’s strength, given the trading data, although it disappointed the market, was still better than in the first quarter.

“Generally recent economic data from China shows growth is stable. The interest rate rise and the trend of US dollar will affect the currency most,” he said.

The DXY Index, a measure of the strength of US dollar, at one stage reached the 98 level to a seven-month high and ended at 97.97, up 0.3 per cent overnight on Thursday, as the minutes of FOMC meeting strengthened expectation on a US interest rate rise in December.

“Going into the release of the minutes, the probability of a rate hike by the end of 2016 had increased to 67 per cent from 58 per cent. The decision was a ‘close call’ for several of the participants who did not in the end advocate for a rate hike in September,” PIMCO global strategic advisor Rich Clarida said.

As the committee remained divided and there was no evidence the chairwoman Janet Yellen had tried to forge consensus, a rate rise in November is unlikely, Clarida said.

The pound resumed its falling streak, down 0.25 per cent or 29 points to US$1.2175, with the euro falling 0.07 per cent US$1.1013.

The Japanese yen inched up 0.09 per cent to 104.1 against the greenback.