Bloomberg News

China Yuan Weakens as November Inflation Cools to 14-Month Low

December 09, 2011

Dec. 9 (Bloomberg) -- China’s yuan declined this week on speculation policy makers will slow currency appreciation as inflation cooled to the slowest pace in 14 months.

Consumer prices rose 4.2 percent in November from a year earlier after increasing 5.5 percent the previous month, the National Bureau of Statistics said today. Risks of yuan depreciation are rising in the short term, triggered by “large- scale” capital outflows, Zhang Monan, a researcher at the State Information Center, wrote in a commentary in the China Securities Journal today.

“Easing inflation implies there’ll be less room for yuan appreciation,” said Edmond Law, deputy head of foreign exchange at BWC Capital Markets in Hong Kong. “Officials will now shift their focus to protecting economic growth amid the increasingly uncertain global outlook. The inflation data confirms further monetary easing is likely.”

The yuan fell 0.1 percent this week to close at 6.3647 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It dropped 0.04 percent today. The People’s Bank of China set the daily fixing 0.05 percent lower at 6.3352 per dollar, the weakest level since Dec. 1. The currency is allowed to fluctuate as much as 0.5 percent on either side of the fixing.

In Hong Kong’s offshore market, the yuan gained 0.3 percent this week and 0.08 percent today to 6.3625 per dollar. Twelve- month non-deliverable forwards dropped 0.5 percent this week and 0.2 percent today to 6.4130, a 0.8 percent discount to the onshore spot rate.

No country can have one-way appreciation of its currency, the China Securities Journal reported today, citing former People’s Bank of China Deputy Governor Wu Xiaoling.

-- Editors: Ven Ram, 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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