Bloomberg News

Yuan Forwards Drop a Second Day as Manufacturing Growth Cools

November 01, 2011

Nov. 1 (Bloomberg) -- Non-deliverable forwards in the yuan dropped for a second day on speculation China will slow appreciation in the currency after manufacturing growth cooled.

The Purchasing Managers’ Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said in a statement today. That compared with the median estimate of 51.8 in a Bloomberg News survey. A reading above 50 indicates expansion. Premier Wen Jiabao said on Oct. 29 that China will “fine tune” its economic policies at an appropriate time, fuelling speculation for monetary easing.

“From the beginning of next year, the yuan’s pace of appreciation will be flatter,” said Leong Sook Mei, regional head of global currency research at Bank of Tokyo Mitsubishi UFJ Ltd. in Singapore. “The PMI shows inflation will come off.”

Twelve-month forwards slipped 0.14 percent to 6.3760 per dollar as of 10:08 a.m. in Hong Kong, according to data compiled by Bloomberg. In the spot market, the yuan weakened 0.08 percent to 6.3599 in Shanghai, according to the China Foreign Exchange Trade System, trimming gains this year to 3.8 percent.

The People’s Bank of China set a weaker daily reference rate for the first time in three days, fixing it 0.09 percent lower at 6.3293.

A government report on Nov. 9 may show China’s inflation rate eased to 5.5 percent in October from a year earlier, according to the median estimate of economists in a Bloomberg News survey. Consumer prices have increased at an annual pace of more than 6 percent in each of the previous four months.

In Hong Kong’s offshore market, the yuan declined 0.15 percent to 6.3998.

--Editors: Simon Harvey, Ven Ram

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

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


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