Bloomberg News

China’s Yuan Advances This Week as Inflation Remains Above 6%

October 14, 2011

Oct. 14 (Bloomberg) -- China’s yuan rose for a second week after a government report showed inflation exceeded 6 percent for a fourth month.

The statistics bureau said today consumer prices climbed 6.1 percent in September from a year earlier, compared with the 6.2 percent rise in August. The currency dropped 0.4 percent yesterday after a report showed China’s overseas sales grew at the weakest pace since February, while the U.S. Senate passed legislation letting companies seek duties to compensate for an undervalued yuan.

“Tackling inflation remains China’s top priority and that’s positive for the yuan,” said Daniel Chan, chief economist at BWC Capital Markets in Hong Kong. “The government will continue with its gradual appreciation approach to ease import prices, while it’s watching closely the impact of a global slowdown on the exporting industries.”

The yuan gained 0.12 percent this week and 0.05 percent today to 6.3785 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The People Bank’s of China lowered the daily reference rate 0.04 percent to 6.3762 per dollar today, The yuan is allowed to fluctuate 0.5 percent on either side of the fixing.

In Hong Kong’s offshore market, the yuan advanced 0.26 percent today to 6.4430, limiting this week’s loss to 0.3 percent. It’s at a 1 percent discount to the onshore spot rate. Twelve-month non-deliverable forwards rose 0.13 percent to 6.4030. The contracts dropped 0.45 percent this week.

Exports Decline

Overseas sales rose 17.1 percent in September from a year earlier, compared with 24.5 percent growth in August and the 20.5 percent median estimate in a Bloomberg News survey of economists, according to the customs bureau yesterday.

The government will introduce more policies to boost economic growth as exports slump, Jing Ulrich, Hong Kong-based chairman of global markets for China at JPMorgan Chase & Co., said in a Bloomberg Television interview today. The yuan will appreciate a further 2 percent against the U.S. dollar this year and 5 percent next year, she said.

China’s foreign ministry warned U.S. lawmakers on Oct. 12 that the proposed bill allowing penalties against countries that undervalue their currencies would damage bilateral trade and risks undermining the global recovery. The legislation will now move to the Republican-controlled House of Representatives.

-- Editors: Sandy Hendry, Simon Harvey

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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