China’s yuan is feeling the pressure as it weakens against the US dollar ahead of key US inflation data. As markets await clues on when the Federal Reserve might start cutting rates, the yuan is expected to stay within a narrow range for now.

Opening at 7.1720 per dollar, the yuan traded 119 pips lower and 0.49% weaker than the previous session's close. Meanwhile, the yen also softened slightly in a market thinned by a Japanese holiday.

Despite a 0.5% rise against the dollar this month, driven by the unwinding of short positions and a surprise rate hike by the Bank of Japan, the yuan has been under pressure since early 2023. Ongoing property issues, weak consumption, and falling yields have kept foreign investors at bay, with capital flowing out of the yuan and into other markets.

All eyes are now on US producer and consumer price data, as well as the upcoming global central bankers’ meeting at Jackson Hole, Wyoming. China is also set to release critical economic data this week, expected to show a sluggish start to the second half of the year.

As the People’s Bank of China moves to stabilize the market, it’s a crucial moment for both domestic and global traders.

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