Tue, Jul 19, 2016 - Page 10 News List

Yuan at 2010 low as US dollar rises


US dollar banknotes and a Chinese 100 yuan banknote are pictured in Beijing on Jan. 21.

Photo: Reuters

China’s yuan fell to the weakest level since 2010, pulled down by cooling property prices, a US dollar rebounding on haven demand and a weaker central bank fixing.

New home prices rose in fewer cities last month compared with a month earlier, according to official data released yesterday, blunting optimism prompted by last week’s figures showing forecast-beating economic growth.

The monetary authority weakened the yuan’s daily fixing to the lowest since 2010 after the US dollar strengthened on Friday following a coup attempt in Turkey. The greenback was supported yesterday also as China said it would hold military exercises in the South China Sea.

“The [US] dollar strengthened as orders to buy the currency jumped, pressuring the yuan and the rest of Asian currencies lower,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia. “There’s news that China will hold military exercises in the South China Sea later this month,” which could spur some haven-demand for the greenback.

The yuan fell 0.14 percent to 6.6974 per US dollar as of 12:40pm in Shanghai. It dropped to 6.6998 earlier, the weakest level since November 2010. The currency traded in Hong Kong’s offshore market climbed 0.08 percent.

China’s announcement of military drills to be held between today and Thursday comes after the Permanent Court of Arbitration in The Hague last week ruled that the nation’s island-building and other efforts to assert control over disputed waters had “aggravated” tensions.

The Bloomberg Dollar Spot Index has climbed 0.4 percent in the past two days as data from the US indicated improving economic prospects and a coup attempt in Turkey boosted haven demand.

The failed putsch spurred cautious sentiment, which probably spilled into Asia yesterday morning, said Fiona Lim, a senior currency strategist at Malayan Banking Bhd in Singapore.

A Bloomberg replica of the CFETS RMB Index, which tracks the yuan against 13 currencies, rose to 94.47, the highest since July 5. The trade-weighted gauge posted its first weekly advance since the end of May last week.

The change in direction for the yuan index indicates the People’s Bank of China might have intervened to curb mounting bearish speculation on the yuan, said Zhou Hao (周浩), Singapore-based senior economist at Commerzbank AG.

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