Yuan forwards fell the most in two weeks after government data showed industrial production and exports trailed estimates and as the World Bank cut its global growth outlook.
The discount on yuan forwards to the onshore spot widened to the most in four years today as top Dim Sum debt underwriters predict a halt to the currency’s rise. China’s domestic markets resumed trading today after a three-day holiday for the Dragon Boat Festival. The World Bank reduced its growth forecast for the world economy to 2.2 percent from a January estimate of 2.4 percent, while Morgan Stanley cut its 2013 projection for China’s expansion to 7.6 percent from 8.2 percent.
“Yuan appreciation pressure is easing on dollar strength and the tougher growth outlook,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “The authorities are likely to pause gains to help revive growth.”
Twelve-month non-deliverable forwards declined 0.31 percent to 6.2870 per dollar as of 4:34 p.m. in Hong Kong, a 2.44 percent discount to the onshore spot, according to data compiled by Bloomberg. That’s the biggest gap since February 2009.
In Shanghai, the currency closed at 6.1344 per dollar, little changed from last week’s 6.1335, according to China Foreign Exchange Trade System prices. The spot rate touched 6.1429 earlier, the lowest since May 16. The yuan is outperforming Asia’s most-traded currencies this quarter, with an appreciation of 1.2 percent, according to data compiled by Bloomberg. All of the 10 other major exchange rates have declined.
The People’s Bank of China raised the yuan’s daily reference rate by 0.01 percent to a record 6.1612 per dollar today. The spot is allowed to diverge a maximum 1 percent on either side of the fixing.
China released trade and manufacturing data that showed industrial output growth slowed to 9.2 percent from a year earlier in May, less than the 9.4 percent forecast in a Bloomberg survey of economists. Exports rose the least in 10 months. Chinese President Xi Jinping completed a two-day summit with U.S. President Barack Obama in California on June 8.
“With the Xi-Obama meetings over, there’s less incentive for China to have a stronger yuan in the near future as political pressure would have eased for now,” Lai said.
In Hong Kong’s offshore market, the yuan gained 0.04 percent to 6.1403 per dollar, according to data compiled by Bloomberg.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, fell three basis points, or 0.03 percentage point, to 1.9 percent.
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