FX.co ★ Offshore Yuan Snaps 3-Day Losing Streak

The offshore yuan strengthened to around 6.79 per dollar on Thursday, ending a three-session losing streak, as stronger producer price growth bolstered expectations that deflationary pressures are easing despite still-subdued consumer demand. Annual producer inflation accelerated to 4.1% in June from 3.9% in May, the fastest pace since July 2022, driven by higher commodity and energy costs amid ongoing tensions in the Middle East. By contrast, annual consumer inflation slowed to 1% from 1.2% in May, a three-month low. Rising global prices for oil, semiconductors, and industrial metals have pushed up factory-gate prices, but weak domestic demand has constrained firms’ ability to pass on higher costs to consumers, squeezing profit margins. On the policy front, the central bank reiterated its commitment to an appropriately accommodative monetary stance and to strengthening financial support for domestic consumption, while acknowledging the persistent imbalance between strong supply and relatively weak demand.