FX.co ★ Offshore Yuan Retreats After Inflation Data

The offshore yuan weakened to around 6.74 per dollar on Monday, pulling back from the more than three-year high hit in the previous session, as softer inflation data highlighted ongoing weakness in domestic demand. Annual consumer inflation slowed to a six-month low of 0.5% in July, driven by falling food prices and a deceleration in non-food costs. Producer price inflation also eased, slipping to 3.5% from 4.1%, its first moderation since turning positive in March, when an oil-price spike prompted by Middle East tensions had pushed it higher. At the same time, the Political Bureau of the Communist Party of China Central Committee recently committed to more proactive and effective macroeconomic policies, including accelerating the use of fiscal funds and bond proceeds, and maintaining support for large-scale equipment upgrades and consumer goods trade-in initiatives. The leadership also stressed the importance of strengthening domestic demand, as consumer spending remains subdued despite resilient exports and solid industrial output.