Yuan volatile, weak services data raise concerns

The Chinese yuan remained volatile following a strong start this week, as investors remain cautious.

The offshore yuan reached a multi-month high during Monday’s rally. Meanwhile, economic data reinforced concerns over the strength of China’s recovery.

The Caixin services PMI fell to its lowest level since September, indicating a slowdown in activity. New orders decelerated, employment contracted for a second consecutive month, and businesses reduced prices to stimulate demand.

Although the May Day holiday brought a modest uptick in consumer activity, overall per capita spending remained below pre-pandemic benchmarks.

Developments in U.S.-China trade relations further complicate the outlook. While both governments have expressed a willingness to engage in negotiations, the absence of clear progress and continued tariff uncertainty could weigh on investor confidence and exacerbate currency market volatility. Without a meaningful shift in trade policy or a marked improvement in domestic economic indicators, the currency could continue to face volatility risks.