The offshore yuan weakened to around 6.79 per dollar in June, erasing two consecutive months of gains as a stronger US dollar and a series of softer-than-expected daily fixings from the People’s Bank of China (PBoC) weighed on the currency. The dollar advanced as investors priced in a higher-for-longer path for US interest rates, while persistent geopolitical uncertainty in the Middle East bolstered demand for the greenback’s safe-haven appeal.
Additional downward pressure on the yuan came from the PBoC’s continued setting of weaker-than-anticipated reference rates, reinforcing expectations that policymakers are comfortable with a gradual depreciation of the currency.
On the economic front, the manufacturing PMI inched up to 50.3 from 50.0, surpassing market expectations of 50.1, supported by resilient demand for high-tech exports that helped offset trade disruptions linked to tensions in the Middle East. At the same time, the non-manufacturing PMI rose to 50.2 from 50.1, beating forecasts of 49.9 and indicating ongoing stabilization in the services and construction sectors.
