The Chinese yuan maintained its weakness to start the trading week, making the currency turn flat against its US peer for the year. The yuan has struggled since breaking below 6.3, mainly on global economic uncertainty and chaos in the financial markets. Can the yuan renew its momentum, or is it poised to continue its downward trend?
According to the National Bureau of Statistics (NBS), China’s trade surplus widened to $103.25 billion, beating the market forecast of $60 billion. The world’s second-largest economy saw its exports ballon for the eighth consecutive month, while imports increased at a softer pace.
NBS data found that exports surged 60.6% year-over-year to $468.87 billion in the January-February period, buoyed by refined oil and steel amid increasing international demand and improving manufacturing activity. Economists had anticipated 38.9% growth.
Imports advanced at an annualized pace of 22.2% to $365.62 billion in January-February combined, beating the median estimate of 15.5%. The country purchased more iron ore, steel, copper, natural gas, crude oil, meat, and plastics. But imports slipped for coal, refined oil, and soybeans.
The People’s Bank of China (PBoC) reported that foreign exchange reserves totaled $3.205 trillion last month, slightly down from 3.211 trillion in January. Industry observers had penciled in a reading of $3.2 trillion. The value of the central bank’s gold reserves declined from $116.76 billion in January to $109.18 billion in February, mainly due to falling prices.
According to a statement from the PBoC, officials completed $1.54 billion of reverse repurchasing agreements to maintain ample liquidity volumes in the banking system. The interest rate for seven-day reverse repos stood at 2.2%.
This comes as policymakers revealed that they are considering a more cautious approach to monetary policy that targets specific industries and pushes ahead high-quality development. But market analysts are fearful that any tapering could slow down the economic recovery and hit stocks, which have already taken a beating in recent sessions.
The USD/CNY currency pair rose 0.45% to 6.5261, from an opening of 6.4968, at 16:36 GMT on Monday. The EUR/CNY dipped 0.03% to 7.377, from an opening of 7.7400.