Bloomberg News

Yuan Falls as GDP Growth Trails Estimates, Europe Concerns Build

October 18, 2011

Oct. 18 (Bloomberg) -- The yuan fell for the first time in three days as the government reported a sharper slowdown in third-quarter economic growth than analysts forecast.

The People’s Bank of China set a weaker reference rate as Germany doused optimism Europe’s debt crisis will be resolved this year. The internal and external environment for China’s economic development is “rather complicated with numerous instabilities and uncertainties,” the statistics bureau said today in Beijing. Growth in factory output and retail sales exceeded expectations in September, data showed.

“We missed on the GDP expectations but we had upside surprise on industrial production and retail sales data, so it does provide a bit of a neutral indication,” said Sacha Tihanyi, a Hong Kong-based currency strategist at Scotia Capital, the investment banking unit of Bank of Nova Scotia. “It’s risk aversion that is affecting the yuan. The typical habit of euro-zone policy makers is to disappoint the markets.”

The yuan slid 0.17 percent to close at 6.3813 per dollar in Shanghai, having been 0.07 percent weaker before the gross domestic product figures were released, according to the China Foreign Exchange Trade System. The currency is allowed to fluctuate as much as 0.5 percent on either side of the central bank’s daily fixing, which was set at 6.3749 today.

Twelve-month non-deliverable forwards dropped 0.21 percent to 6.3975, a 0.3 percent discount to the spot rate, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan was little changed at 6.4318.

GDP, Output

The world’s second-largest economy expanded 9.1 percent from a year earlier in the third quarter, the slowest pace in two years, the statistics bureau reported. Economists expected growth of 9.3 percent, based on the median forecast in a Bloomberg survey.

Industrial production climbed 13.8 percent in September, more than the 13.4 percent projected in a Bloomberg survey. Retail sales increased 17.7 percent, beating the 17 percent gain projected in a separate poll.

German Chancellor Angela Merkel’s office yesterday ruled out a complete fix to Europe’s debt crisis at an Oct. 23 meeting of regional leaders.

--Editors: James Regan, Anil Varma

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; 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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