Bloomberg News

Yuan Drops This Week on European Concern, Hu’s Rebuke of Obama

November 20, 2011

Nov. 18 (Bloomberg) -- The yuan declined for a second week on concern China will ignore calls from U.S. President Barack Obama to allow faster currency appreciation as Europe’s debt crisis cools export demand.

The yuan may face depreciation in two years as the country’s trade surplus may account for less than 1.6 percent of gross domestic product this year, Li Daokui, an adviser to the People’s Bank of China said today. China’s consumer prices rose 5.5 percent in October from a year earlier, compared with 6.1 percent in September, the National Bureau of Statistics reported last week.

“As inflation eases and the European debt crisis may worsen, China could opt for a slower pace of yuan appreciation to protect exports,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd. “Obama’s calls for a stronger yuan is more a political move and is likely to fall on deaf ears in China.”

The yuan fell 0.18 percent this week and 0.05 percent today to 6.3538 per dollar as of 9:56 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank set its daily reference rate 0.01 percent stronger at 6.3548 today. The currency is allowed to trade up to 0.5 percent on either side of the daily reference rate.

In Hong Kong’s offshore market, the yuan strengthened 0.09 percent today, limiting the week’s loss to 0.03 percent. Twelve- month non-deliverable forwards gained 0.1 percent this week to 6.3265, a 0.4 percent premium to the onshore spot rate. The contracts were little changed today.

Chinese President Hu Jintao told Obama at a Nov. 12 meeting that a large appreciation won’t solve U.S. problems. Asian stocks tumbled this week as borrowing costs in some European countries surged. Obama said this week that “enough is enough” on China’s yuan policies.

--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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