Bloomberg News

Yuan Pares Weekly Gain After Non-Manufacturing Industries Slow

February 05, 2012

Feb. 3 (Bloomberg) -- China’s yuan fell, paring the week’s gain, after data showed expansion in the nation’s non- manufacturing industries slowed.

A purchasing managers’ index declined to 52.9 last month from 56 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today in Beijing. A reading above 50 indicates growth. The People’s Bank of China set the yuan’s daily reference rate weaker after fixing it stronger in the past two days as Asian currencies dropped against the dollar.

“We are looking for more weakness in growth in the first half and naturally the pace of yuan appreciation will slow before it catches up in the second half,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia.

The yuan weakened 0.04 percent to 6.3041 per dollar as of 10:24 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency rose 0.6 percent this week. The central bank set the fixing 0.04 percent weaker at 6.3102. The yuan is allowed to trade 0.5 percent on either side of the rate.

Premier Wen Jiabao has pledged to expand services and consumer spending to boost jobs and help sustain growth as Europe’s debt crisis threatens exports and property sales slide. The government said it will increase credit to small companies, including some service providers, and local authorities are raising minimum wages, pensions and welfare payments.

Gary Shilling, president of New Jersey-based consultancy firm A. Gary Shilling & Co., said weaker demand overseas will subdue Chinese growth and the economy is headed for a “hard landing” in 2012.

Exports, CPI Data

Gross domestic product increased 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said on Jan. 17, the least since the three months ended June 2009. The median estimate in a Bloomberg survey was 8.7 percent. China is due to report data on consumer prices and exports next week.

In Hong Kong’s offshore market, the yuan slipped 0.14 percent this week to 6.2955 and was unchanged today. Twelve- month non-deliverable forwards fell 0.1 percent to 6.2785, taking this week’s loss to 0.24 percent, according to data compiled by Bloomberg. The contracts were at a 0.4 percent premium to the onshore spot rate.

--Editors: 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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