FX.co ★ Offshore Yuan Holds Ground

The offshore yuan maintained its upward trajectory, stabilizing around 7.12 per dollar on Tuesday following three consecutive sessions of gains. This strength was primarily driven by the weakening of the US dollar. The dollar continued to face headwinds as rising concerns about a slowing labor market heightened predictions of interest rate cuts by the Federal Reserve. Market participants are now factoring in an 89% probability of a 25 basis point cut at next week's meeting, with some even anticipating a potential 50 basis point reduction. On the domestic front, the yuan faced downward pressure after recent statistics revealed a decline in China's trade performance in August; exports slowed to a six-month low, and imports fell short of expectations, exerting further pressure on growth. In response, China is urging ASEAN to conclude an enhanced free trade agreement by the end of the year, aiming to bolster exports and mitigate the impact of US tariffs. This move underscores China's commitment to expanding market access and fostering multilateral partnerships. As the week progresses, market focus shifts to significant upcoming data, including August's consumer price index, which is anticipated to rekindle deflationary concerns.