China's yuan slips as dollar holds near two-week high; weak data weighs

China's yuan weakened slightly against the US dollar on Tuesday, according to Business Recorder, while the greenback held close to a two-week peak. After opening at 6.7100 per dollar, the spot rate stood at 6.7104 at 0237 GMT, 19 pips weaker than the prior late-session close. Higher oil prices pushed Treasury yields up and fuelled bets on a Federal Reserve rate rise this week, leaving the dollar index 0.132% higher at 99.62.

Analysts at MUFG cited sharp rises in developed market yields, oil price pressure tied to a renewed Middle East conflict, and worries about a sharp slowdown in AI spending. Industrial output accelerated in August, but weak consumption and a deeper investment slump raised concerns about imbalances in the economy. Analysts at China Great Wall Securities added that subdued August credit data pointed to ample liquidity and low interest rates through year-end.

Market participants said the yuan was likely to keep a steady, slightly firmer trend, backed by a large trade surplus and a record interest rate gap with the US while investors await the Fed decision. The yuan has gained 0.1% against the dollar in the current month and 4.2% year to date. The People's Bank of China set the midpoint at 6.7670 per dollar before the open, the firmest since February 3, 2023, but 619 pips below a Reuters estimate.