Bloomberg News

Yuan Drops on Speculation U.S. Appreciation Pressure Lessening

January 12, 2012

Jan. 12 (Bloomberg) -- The yuan fell for a seventh day, the longest losing streak since 2006, on speculation U.S. pressure on China to strengthen its currency is lessening.

The People’s Bank of China set the fixing 0.12 percent weaker at 6.3230 per dollar today. Treasury Secretary Timothy F. Geithner said the U.S. and China had a “strong cooperative relationship” on economic growth, financial stability and nonproliferation after holding talks with Premier Wen Jiabao in Beijing yesterday. Consumer prices rose 4.1 percent from a year earlier in December, cooling for a fifth month, the National Bureau of Statistics said today.

“There was a clear signal from the visit that the yuan is a big move down on the agenda in terms of U.S.-China relations,” said Robert Minikin, a senior currency strategist at Standard Chartered Plc in Hong Kong. “We’re seeing more two- way variability in the yuan now with no clear trend.”

The yuan weakened 0.10 percent to 6.3217 per dollar as of 10:27 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency is allowed to trade 0.5 percent on either side of the daily fixing. The yuan strengthened 4.7 percent last year, the best performance among Asia’s 10 most- traded currencies excluding the yen.

Policy makers may need to expand the yuan’s trading band and give the market a larger role in determining its exchange rate, the Shanghai Daily reported today, citing Chen Xuebin of the Institute for Financial Studies at Fudan University in Shanghai.

December’s consumer-price gains were the least since September 2010. China has scope to loosen fiscal and monetary policy as the nation is bringing inflation under control and has a small budget deficit, Stephen Roach, non-executive chairman of Morgan Stanley Asia, said in an interview today.

In Hong Kong’s offshore market, the yuan declined 0.09 percent to 6.3161 per dollar. Twelve-month non-deliverable forwards dropped 0.06 percent to 6.3215, almost the same as the onshore spot rate.

--Editors: Andrew Janes, Sandy Hendry

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

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


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