Bloomberg News

China Yuan Forwards Drop as Europe Crisis Adds to Growth Concern

October 20, 2011

Oct. 20 (Bloomberg) -- Yuan non-deliverable forwards weakened as a lack of progress in resolving Europe’s debt crisis added to concern economic growth will cool in China, the world’s largest exporter.

Stocks indexes slipped across Asia today after a report of a split between France and Germany over the European bailout fund talks. Consumer prices in China increased 6.1 percent in September from a year earlier, the National Bureau of Statistics said last week. The government’s full-year inflation target is 4 percent. Gross domestic product in the third quarter increased 9.1 percent from a year earlier, compared with 9.5 percent in the previous three months, data showed this week.

“All the focus is on the European talks ending this weekend,” said Kenix Lai, a senior market analyst at Bank of East Asia Ltd. in Hong Kong. “Recent data is showing China still has pretty high inflation, together with more and more signs of a slowdown.”

Twelve-month forwards declined 0.14 percent to 6.3960 per dollar as of 10:54 a.m. in Hong Kong, a 0.3 percent discount to the onshore spot rate, according to data compiled by Bloomberg.

The yuan dropped 0.03 percent to 6.3792 in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China set the daily reference rate at 6.3652, the strongest level in more than a week. The currency fell 0.07 percent to 6.4265 in offshore trading in Hong Kong.

Risks stemming from China’s shadow banking system and private lending must be “strictly controlled,” and such loans will be curbed, the head of China Banking Regulatory Commission said yesterday. China’s central bank will start a second round of investigation of the private lending industry and may introduce a monitoring system in the future, the 21st Century Business Herald reported today, citing an unidentified person close to the People’s Bank of China.

-- Editors: Andrew Janes, James Regan

To contact Bloomberg News staff for this story: Andrea Wong in Taipei at awong268@bloomberg.net

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To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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