Oct. 27 (Bloomberg) -- China’s yuan was little changed after French President Nicolas Sarkozy said the euro region’s bailout fund may reach $1.4 trillion as European officials concluded talks in Brussels.
The European Union and banks agreed to a 50 percent writedown on Greek debt, which German Chancellor Angela Merkel described as “a step forward” in stemming the debt crisis. Sarkozy said he would welcome China’s support in the rescue effort and is due to speak with President Hu Jintao later today.
“China is watching how Europeans will resolve the debt crisis and so the yuan will remain volatile for a while,” said Daniel Chan, chief economist of BWC Capital Markets in Hong Kong. “Chinese officials are also worried that exports could drop significantly as global growth slows.”
The yuan traded at 6.3528 per dollar as of 11 a.m. in Shanghai, from 6.3533 yesterday, according to the China Foreign Exchange Trade System. The People’s Bank of China set its daily reference rate 0.03 percent weaker at 6.3477. The currency is allowed to trade up to 0.5 percent on either side of the daily rate.
In Hong Kong’s offshore market, the yuan advanced 0.04 percent to 6.3988. Twelve-month non-deliverable forwards were also little changed at 6.3885, compared with 6.3890 yesterday.
China may cut banks’ reserve requirements before the end of this year to stoke lending to small companies and boost the economy, according to Guotai Junan Securities Co., Mizuho Securities Asia Ltd. and Barclays Plc. Premier Wen Jiabao announced on Oct. 22 that the government may fine-tune its economic policies as needed.
--Editors: Simon Harvey, Ven Ram
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