Bloomberg News

Yuan Drops a Third Week in Longest Losing Streak Since July 2010

November 27, 2011

Nov. 25 (Bloomberg) -- The yuan fell for a third week, the longest losing streak since July 2010, on speculation China will slow the pace of appreciation to protect its exporters as economic growth cools.

Manufacturing may contract this month by the most since March 2009, a preliminary purchasing managers’ index from HSBC Holdings Plc and Markit Economics showed on Nov. 23. Exports rose 15.9 percent in October, the least in almost two years, official data show. Yields on 10-year notes were at 3.61 percent yesterday, down from a three-year high of 4.13 percent on Aug. 30, according to Chinabond data.

“Lower yields are discouraging massive buying of the Chinese yuan,” said Tommy Ong, Hong Kong-based senior vice president of treasury and markets at DBS Group Holdings Ltd. “There’s a commercial demand for dollars from importers as it approaches the end of the year.”

The yuan fell 0.3 percent to 6.3750 per dollar this week, according to the China Foreign Exchange Trade System. It dropped 0.11 percent today. The People’s Bank of China set its daily reference rate 0.03 percent stronger at 6.3554. The currency is allowed to trade up to 0.5 percent on either side of the daily reference rate.

The People’s Bank of China lowered reserve requirements for more than 20 rural cooperative banks by half a percentage point, the central bank’s Hangzhou branch said in an e-mailed statement this week.

Industrial production rose 13.2 percent from a year earlier in October, the least in 12 months, official figures show. Third-quarter economic growth of 9.1 percent was the slowest since 2009.

Forwards Drop

Financial institutions’ yuan positions, accumulated from central bank purchases of their foreign exchange, fell 24.9 billion yuan ($3.9 billion) in October, a central bank report showed this week. The measure is an indication of capital flows.

Twelve-month non-deliverable forwards fell 1.1 percent this week to 6.4055 per dollar, a 0.5 percent discount to the onshore spot rate. The contracts dropped 0.2 percent today. In Hong Kong’s offshore market, the yuan declined 0.7 percent to 6.3999 this week and retreated 0.13 percent today.

--With assistance from Andrea Wong in Taipei. Editors: Andrew Janes, Simon Harvey

To contact the reporter on this story: Kyoungwha Kim in Beijing at kkim19@bloomberg.net

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


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