Yuan forwards fell the most since October 2011 after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce monetary stimulus that helped spur fund inflows to emerging-market assets.
Twelve-month contracts dropped to a three-month low on signs manufacturing is shrinking at a faster pace in June, a survey released today by HSBC Holdings Plc and Markit Economics showed. Bernanke said yesterday the Fed could taper its $85 billion of monthly bond purchases this year and end the program in 2014 if the U.S. economy achieves sustainable growth.
“With the Fed tapering prospect and poor China data, there is some unwinding in Asian currencies including the yuan,” said Patrick Cheng, a Hong Kong-based foreign-exchange analyst at Haitong International Securities Co. “There’s also expectations more funds will leave emerging markets.”
Non-deliverable forwards due in a year declined 0.5 percent to 6.3078 as of 3:19 p.m. in Hong Kong, according to data compiled by Bloomberg. That’s the biggest drop since Oct. 13, 2011. The discount to the spot rate was 2.9 percent, the deepest since February 2009.
The preliminary reading of 48.3 for a Purchasing Managers Index for June, compares with the 49.1 median forecast in a Bloomberg News survey of 15 economists, HSBC and Markit Economics data showed. May’s final reading of 49.2 was the first one below 50 since October, indicating a contraction.
Yuan positions at China’s financial institutions accumulated from sales of foreign exchange, an indication of capital inflows, rose 66.9 billion yuan ($10.9 billion) in May, the central bank reported June 14. That’s the smallest gain since November.
The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.3 percent, taking a two-day gain to 1.3 percent, the biggest since May 10.
The People’s Bank of China set the yuan’s reference rate 0.03 percent weaker at 6.1698 per dollar today, the lowest level since June 6. The onshore spot rate is allowed to diverge from the fixing by a maximum 1 percent.
“Huge U.S. dollar liquidity infusions that have been boosting emerging-market assets are likely to begin to slow and then to end, perhaps sooner than anticipated,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said in a research note today.
China’s benchmark money-market rates climbed to records as the central bank refrained from using reverse-repurchase agreements to address a cash crunch. Overnight yuan interbank rates in Hong Kong climbed to 6.5 percent today, compared with 2.75 percent on June 14, according to HSBC quotes published on the Treasury Markets Association website.
“Concerns about outflows will continue to weigh on the yuan,” said Roy Teo, a currency strategist at ABN Amro Bank NV in Singapore. “It’s more of a short-term market reaction” because a stronger U.S. economy is positive for global growth, and Asia will continue to benefit, he added.
In the onshore spot market in Shanghai, the yuan was little changed at 6.1260 per dollar, according to China Foreign Exchange Trade System prices. It has strengthened 1.7 percent this year, the best performer among Asia’s 11 most-traded currencies, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan held at 6.1275.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased four basis points, or 0.04 percentage point, to 1.82 percent.
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