Bloomberg News

Yuan Drops Most in Two Weeks as Costlier Oil May Slow Growth

February 27, 2012

Feb. 27 (Bloomberg) -- The yuan declined the most in two weeks on speculation oil prices at a nine-month high will slow global economic growth and spur Chinese policy makers to limit currency gains to protect exporters.

Growth in Asia’s largest economy may slip to 8.59 percent this year from 9.2 percent in 2011, according to a joint forecast by Xiamen University and National University of Singapore released Feb. 25. Crude oil reached $109.95 per barrel in New York on Feb. 24, the highest since May 4. The People’s Bank of China weakened its daily reference rate for the yuan by 0.03 percent to 6.2985 per dollar, slightly stronger than the 6.3009 at the end of last year.

“Chinese officials are torn between protecting growth and curbing inflation, so the yuan fixing has been kept steady at around 6.3 per dollar,” said Edmond Law, the Hong Kong-based deputy head of foreign-exchange at BWC Capital Markets. “I don’t see any major changes in policies before the National People’s Congress in March.” The NPC, China’s legislature, will open its annual session on March 5.

The yuan fell 0.05 percent, the most since Feb. 10, to 6.3010 per dollar as of 10:16 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency is allowed to trade 0.5 percent either side of the reference rate.

In Hong Kong’s offshore market, the yuan slipped 0.05 percent to 6.2998. Twelve-month non-deliverable forwards declined 0.11 percent to 6.2870, a 0.2 percent premium to the onshore spot rate, according to data compiled by Bloomberg.

--Editors: Andrew Janes, 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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