Bloomberg News

Yuan Drops as U.S. Talks Begin on Weaker Global Jobs Data

May 02, 2012

The yuan declined as talks between U.S. and Chinese officials in Beijing began after jobs reports in the U.S. and Europe signaled the global economic recovery is weakening.

The People’s Bank of China set its daily fixing 0.04 percent weaker at 6.2697 per dollar today, tracking declines in Asian currencies as American companies added the fewest workers in seven months and unemployment in Germany unexpectedly increased. China’s non-manufacturing purchasing managers’ index fell to 56.1 in April, from 58 in the previous month, official data showed today. A reading above 50 indicates expansion. U.S. Treasury Secretary Timothy F. Geithner said yuan gains would help the Asian nation revamp its economy, before the fourth round of the U.S.-China strategic and economic dialogue.

“As the meetings start, there’s less reason for the Chinese central bank to keep record fixings,” said Stella Lee, president of Success Futures & Foreign Exchange Ltd. in Hong Kong. “Softer economic data means China won’t allow the yuan to strengthen rapidly as that could hurt exports and growth.”

The yuan fell 0.04 percent to 6.3095 per dollar as of 9:55 a.m. in Shanghai, a 0.63 percent discount to the reference rate, according to the China Foreign Exchange Trade System. It is allowed to trade 1 percent either side of the daily fixing. One- month implied volatility for the currency, a measure of exchange-rate swings used to price options, was unchanged at 2.1 percent.

Yuan appreciation pressure will ease as China faces slowing economic growth and a falling long-term rate of return on capital, People’s Daily reported, citing Liu Yuhui, a researcher from the Chinese Academy of Social Sciences. Conditions for the yuan’s two-way fluctuation haven’t changed, Liu said.

In Hong Kong’s offshore market, the yuan dropped 0.08 percent to 6.3095. Twelve-month non-deliverable forwards slipped 0.02 percent to 6.3465, a 0.6 percent discount to the onshore spot rate, according to data compiled by Bloomberg.

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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