Yuan Weakens as Greece Rating Cut Fuels Global Growth Concern
February 23, 2012, 4:32 PM ESTBy Bloomberg News
Feb. 23 (Bloomberg) -- China’s yuan dropped by the most in almost two weeks after a Greek rating downgrade fueled concern the global recovery will stall, boosting demand for safer assets.
The MSCI Asia-Pacific Index of shares declined by the most in a week after Fitch Ratings lowered Greece’s credit grade by two levels to C from CCC yesterday, saying a default is highly likely in the near term. Oil prices, which touched a nine-month high yesterday, are also adding to concern that international economic growth will slow.
“The rating cut has damped market optimism but it won’t change the overall trend of appreciation,” said Liu Dongliang, a Shenzhen-based senior analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. He said the yuan may rise as much as 3 percent against the dollar this year.
The yuan fell 0.05 percent to 6.2992 per dollar as of 10:11 a.m. in Shanghai, the biggest decline since Feb. 10, according to the China Foreign Exchange Trade System. The central bank weakened the reference rate by 0.07 percent to 6.3031. The currency is allowed to trade 0.5 percent on either side of the daily fixing.
Twelve-month non-deliverable forwards strengthened 0.04 percent to 6.2845 per dollar, according to data compiled by Bloomberg. The contracts were at a 0.2 percent premium to the onshore spot rate. In Hong Kong’s offshore market, the currency declined 0.02 percent to 6.2985.
--Judy Chen. Editors: Andrew Janes, Sandy Hendry
To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
