China's yuan edges lower after disappointing trade data

[SHANGHAI] The yuan eased against the US dollar on Monday, dampened by bearish market sentiment after China reported its exports and imports fell more than expected in April, adding to concerns about the health of the world's second-largest economy.

The People's Bank of China set the midpoint rate at 6.5105 per US dollar prior to market open, 0.15 per cent firmer than the previous fix 6.5202.

Spot yuan opened at 6.4960 per US dollar and then fluctuated widely as traders rushed to adjust their positions after a flurry of worse-than-expected domestic economic data over the weekend.

The yuan consequently weakened on sour market sentiment and was changing hands at 6.5043 by midday, easing 0.21 per cent from the previous close.

China's exports in April fell 1.8 per cent from a year earlier, data showed on Sunday, reversing the previous month's brief rise, while imports dropped 10.9 per cent from a year earlier, falling for the 18th consecutive month.

Central bank data showed on Saturday China's foreign exchange reserves rose in April to US$3.22 trillion, marking a second monthly rise this year and suggesting the central bank is easing off its interventions as capital outflows ease.

The latest China Foreign Exchange Trade System (CFETS) data showed that the index for the yuan's value based on the market's trade-weighted basket stood at 96.61 last week, the lowest on record. The index was first published by CFETS in December 2015, setting the yuan's value at 100 at the end of 2014.

Still, a CFETS commentary said on Friday that the Chinese currency is relatively stable against the basket when inflation is included.

Offshore yuan was trading 0.20 per cent softer than the onshore spot at 6.5174 per US dollar.

Offshore one-year non-deliverable forwards contracts, considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.6805, or 2.54 per cent weaker than the midpoint.

The Chinese central bank's clampdown on bearish yuan speculators that stunted offshore trading has inadvertently injected new life into the sleepy non-deliverable forwards market.

REUTERS