Yuan forwards in Hong Kong slid to a two-month low as China’s manufacturing and trade data for May trailed economists’ estimates and signaled weaker growth in the world’s second-largest economy.
Industrial output rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, official data showed yesterday. The gain in production compared with the 9.4 percent median estimate in a Bloomberg News survey of 39 economists. Exports (CNFREXPY) were at a 10-month low. Barclays cut China’s growth forecast for this year and the next to 7.4 percent, from 7.9 percent and 8.1 percent, respectively, according to a June 9 note. China’s markets are shut today through June 12 for the Dragon Boat Festival holiday.
“Data related to growth all disappointed,” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a note today. “We continue to expect modest fiscal easing and no monetary easing, but there now is a small risk of a rate cut. The yuan should come under downward pressure.”
Twelve-month non-deliverable forwards declined 0.22 percent to 6.2740 per dollar as of 9:56 a.m. in Hong Kong, the lowest level since April 10, according to data compiled by Bloomberg. The contracts were at a 2.2 percent discount to the spot rate in Shanghai, which closed at 6.1335 on June 7. That’s the deepest since March 2009. The offshore yuan fell 0.16 percent to 6.15 per dollar.
The offshore one-year swap contract, which exchanges fixed payments for the floating seven-day repurchase rate, halted an eight-day advance today. The gauge fell one basis point to 3.53 percent, according to data compiled by Bloomberg. The rate China’s lenders charge each other on overnight loans jumped the most in almost two years in Shanghai on June 7 as shrinking capital inflows led to a cash squeeze before the three-day holiday. The seven-day repo fixing rose 208 basis points to 6.88 percent in the week through June 9 in China.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, declined three basis points, or 0.03 percentage point, to 1.85 percent today.
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