China's yuan slips as dollar holds near two-week high; weak data weighs

SHANGHAI, Sept 15 (Reuters) - China's yuan edged lower against the U.S. dollar on Tuesday, as the greenback hovered near a two-week high and a slate of economic data pointed to persistently weak domestic demand.

The spot yuan opened at 6.7100 per dollar and was last trading at 6.7104 at 0237 GMT, 19 pips lower than the previous late-session close.

The dollar inched up to trade near a two-week high on Tuesday as surging oil prices lifted Treasury yields and reinforced expectations that the Federal Reserve will raise interest rates this week.

"Markets continue to be dominated by sharp increases in developed market yields, concerns around oil price increases with a resumption of the Middle East conflict, coupled with fears around a substantial slowdown in AI spending," analysts at MUFG said in a note, adding that they have turned more cautious on risk sentiment.

China's industrial output picked up pace in August, though sluggish consumption and a worsening investment slump reinforced concerns about deepening economic imbalances.

Meanwhile, China's subdued August credit figures suggest that liquidity is likely to remain abundant and interest rates low by the end of the year, analysts at China Great Wall Securities said in a note.

The yuan is likely to maintain its steady-to-slightly-firmer trajectory, market participants said, as China's large trade surplus coexists with a record-wide interest rate gap between China and the U.S., with investors awaiting the outcome of the Fed's rate decision.

The Chinese currency is up 0.1% against the dollar this month and is 4.2% firmer so far this year.

Before the market opened, the People's Bank of China set the midpoint rate at 6.7670 per dollar, its strongest since February 3, 2023, which was 619 pips weaker than a Reuters estimate. The spot yuan is allowed to trade 2% either side of a fixed midpoint each day.

The dollar index , which measures the greenback against a basket of six currencies, was 0.132% higher at 99.62.

The offshore yuan traded at 6.7112 yuan per dollar , down about 0.03% in Asian trade.

LEVELS AT 0237 GMT