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Delta outbreaks in China lead to weaker Yuan

15 Sep 2021

China’s Yuan edged down against the Dollar on Wednesday over concerns regarding the country’s economic recovery due to Delta variant outbreaks.

According to analysts, China’s stringent curbs to eradicate the virus, as opposed to adapting to living with it, could negatively impact the economy.

"We reckon that China's zero-Covid strategy could be increasingly costly for the Chinese economy," according to Lu Ting, chief China economist at Nomura.

Activity indicators were weaker than forecast in August, with industrial output increasing at the weakest pace since July last year, whilst retail sales growth decelerated considerably, Reuters reports.

The onshore spot Yuan opened at 6.4430 per Dollar, before edging down to 6.4421, 39 pips less than the prior late session close.

In addition, the China’s central bank rolled over maturing medium-term loans previously in the session, maintaining the interest rate the same for the 17th consecutive month.

"The full rollover of the MLF provided by the PBOC this morning suggests that some liquidity support is assured but credit growth is strong enough for some ammunition to be kept for the later months," said analysts at Maybank in a note.

Before the market opened, the People's Bank of China (PBOC) set the midpoint rate at 6.4492 per Dollar, 8 pips stronger than the previous 6.4500 amount, the most robust figure since 18 June.

The global Dollar index declined to 92.637 from the previous close of 92.672, whilst the offshore Yuan was trading at 6.439 per Dollar.