Bloomberg News

Yuan Halts Three-Day Loss on Europe’s Efforts to Solve Crisis

November 29, 2011

Nov. 29 (Bloomberg) -- The yuan halted a three-day losing streak on speculation European leaders will boost efforts to solve the region’s sovereign-debt crisis.

European finance ministers will meet in Brussels today to discuss how the European Financial Stability Facility can increase its muscle by insuring sovereign debt with guarantees. The Organization for Economic Cooperation and Development cut its forecast for China’s economic growth to 8.5 percent next year, from an earlier estimate of 9.2 percent, and said property risks overshadow the outlook.

“The yuan was lifted by a small glimpse of hope that Europeans could solve the debt crisis,” said Stella Lee, the Hong Kong-based president of Success Futures & Foreign Exchange Ltd. “However, a dimmer global economic outlook means China will opt for a slower pace of appreciation to safeguard its exporting industries.”

The yuan gained 0.04 percent to 6.3818 per dollar as of 10:03 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency touched 6.3871 yesterday, the weakest level since Oct. 21. The People’s Bank of China set its daily reference rate at 6.3587. The currency is allowed to trade up to 0.5 percent on either side of that level.

In Hong Kong’s offshore market, the yuan fell 0.09 percent to 6.4010 per dollar. Twelve-month non-deliverable forwards rose 0.05 percent to 6.4083, a 0.4 percent discount to the onshore spot rate.

Growth Outlook

Citigroup Inc. lowered its estimate for China’s economic growth next year to 8.4 percent from 8.7 percent, partly due to a property market correction that should slow investment.

The central bank may cut lenders’ reserve requirements before the Chinese New Year in late January if recent capital outflows continue, the New York-based bank said in a research note dated today. The People’s Bank of China may also raise interest rates to stabilize deposits, economists led by Minggao Shen and Shuang Ding said in the report.

Morgan Stanley trimmed its forecast on China’s economic growth next year to 8.4 percent, compared with a previous estimate of 8.7 percent, the bank said in a report yesterday.

--Editors: Sandy Hendry, James Regan

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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