China’s offshore yuan yesterday declined the most since Jan. 23 as the nation’s foreign-exchange regulator highlighted concerns over capital outflows.
China is increasingly finding itself in a situation similar to the 1998 Asian financial crisis, with emerging markets under pressure from capital outflows as the US dollar strengthens, Chinese State Administration of Foreign Exchange’s (SAFE) international payment department head Guan Tao (管濤) said at a forum in Beijing on Saturday last week.
Uncertainties are expected this year while the nation remains attractive to long-term capital, SAFE said in a report on Sunday.
The yuan traded in Hong Kong fell 0.46 percent to 6.2709 per US dollar as of 5:35pm, the lowest since Feb. 4 data compiled by Bloomberg showed. In Shanghai, the currency fell 0.13 percent, the most in two weeks, to close at 6.2485, China Foreign Exchange Trade System prices show.
“The capital outflow concern is causing fluctuations in the financial market and resulting in the drop in the yuan,” Bank of Communications (交通銀行) Shanghai-based macroeconomic policy analyst Chen Hufei said by telephone.
A net US$324 billion flowed out of China last year, not counting foreign direct investment, swinging from inflows of US$56 billion the previous year, according to UBS Group AG. The nation’s banks bought 914.5 billion yuan (US$146 billion) of foreign currency and sold 985.9 billion yuan for clients last month, resulting in a deficit of 71.4 billion yuan, the SAFE said in a statement yesterday.
The onshore yuan ended at a 1.94 percent discount to the central bank’s fixing, nearing the 2 percent limit and close to the 1.96 percent record.
The People’s Bank of China raised the reference rate by 0.02 percent to 6.1273 per dollar. Twelve-month non-deliverable yuan forwards lost 0.24 percent to 6.3855, trading 2.15 percent weaker than the Shanghai spot rate.
The Bloomberg Dollar Spot Index has advanced 2.7 percent this year. China’s economy grew 7.4 percent last year, the weakest in 24 years, and imports fell 19.9 percent last month, the most in more than five years, according to government data.
“Investors are losing interest in the yuan and putting their money in more profitable products, like the dollar,” Agricultural Bank of China International Securities Co (中國農業銀行國際證券) Hong Kong-based co-head of research Banny Lam said by telephone.
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