China’s yuan dropped after the central bank weakened the daily fixing as slowing export growth added to concerns about the strength of the global economy.
The People’s Bank of China lowered the yuan’s reference rate by 0.02 percent to 6.3209 per dollar.
Premier Wen Jiabao (溫家寶) said yesterday the domestic and overseas economic situation is “complicated” and stabilizing growth is a long-term, difficult target.
“The currency is going to continue to depreciate as the growth momentum is still weak,” said Wee-Khoon Chong, a Hong Kong-based fixed-income strategist at Societe Generale SA. “The longer we don’t see signs of substantial growth, the higher is the chance for the yuan to march towards further weakening.”
The yuan fell 0.04 percent to close at 6.3686 per US dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency is allowed to trade as much as 1 percent on either side of the daily fixing. One-month implied volatility, a measure of exchange-rate swings used to price options, held at 1.53 percent.
Overseas shipments climbed 11.3 percent last month from a year earlier, compared with a 15.3 percent gain in May, the customs bureau said on Tuesday. Import growth slowed to 6.3 percent from 12.7 percent.
In Hong Kong’s offshore market, the yuan traded at 6.3645 per dollar, from Tuesday’s 6.3646 percent. Twelve-month non-deliverable forwards gained 0.03 percent to 6.4150, a 0.72 percent discount to the onshore spot rate.
China’s leaders understand the need for a more flexible exchange rate to boost growth over the long term, Australian Treasurer Wayne Swan said yesterday in announcing new currency talks with his nation’s biggest trading partner.
During his visit to Hong Kong and Beijing this week, Swan said he would discuss the potential for “direct convertibility at some stage in the future between the Australian dollar and the renminbi for transactions completed in mainland China, without pricing through the US dollar.”
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