Yuan falls on PRC central bank rate cut


Wed, Jan 30, 2013 - Page 13

The yuan fell to a three-week low yesterday as the People’s Bank of China cut its reference rate to a level that meant the currency’s permitted trading band would prevent appreciation.

The central bank weakened the yuan’s fixing for a fourth day, setting it 0.05 percent lower at 6.2851 per US dollar. That is 0.99 percent lower than Monday’s closing price in Shanghai, where the spot is allowed to deviate from the reference rate by a maximum of 1 percent.

Yuan internationalization still has a long way to go, Xinhua news agency cited IMF Deputy Managing Director Zhu Min (朱民) as saying. The currency has appreciated 2.7 percent since touching a 14-month low on July 25 last year.

“The fixing is a signal that officials are concerned the yuan could be too strong for exports, following the rally in the past months,” Bank of East Asia Ltd analyst Kenix Lai (賴春梅) said.

“There’s also stronger demand for the greenback before [US] Federal Reserve policymakers begin a two-day meeting today {yesterday], Lai said.

The yuan fell 0.03 percent to close at 6.2243 per US dollar in Shanghai yesterday, prices from the China Foreign Exchange Trade System show. It touched 6.2265 per US dollar, the weakest level since Jan. 8.

One-month implied volatility in the Chinese currency, a measure of expected exchange rate moves used to price options, was steady at 1.35 percent.