Yuan Drops to Weak End of Trading Range as Services Output Falls
December 05, 2011, 10:23 PM EST
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By Fion Li
Dec. 5 (Bloomberg) — The yuan fell, testing the weaker end of its permitted trading range for a fourth day, after data showing the first drop in services output since February fanned speculation China will curb currency gains to support exports.
A purchasing managers’ index for non-manufacturing industries fell to 49.7 in November from 57.7 the previous month, the China Federation of Logistics and Purchasing said on Dec. 3. Pressure for yuan gains will diminish because investment capital inflows have fallen, former central bank adviser Yu Yongding wrote in a Chinese Business News commentary today.
“The weak data suggests China is likely to put yuan appreciation on hold for now to leave room for economic growth,” said Stella Lee, the Hong Kong-based president of Success Futures & Foreign Exchange Ltd.
The yuan fell 0.07 percent to close at 6.3641 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It earlier dropped as much as 0.11 percent to 6.3666 after the People’s Bank of China lowered the daily reference rate by 0.06 percent to 6.3349. The currency is allowed to fluctuate as much as 0.5 percent on either side of the fixing.
In Hong Kong’s offshore market, the yuan gained 0.03 percent to 6.3815. Twelve-month non-deliverable forwards were little changed at 6.3815, a 0.3 percent discount to the onshore spot rate.
The yuan will continue to appreciate from 2011 to 2015, the Shanghai Securities News reported today, citing Yang Tao, a researcher with the Chinese Academy of Social Sciences.
A monthly fluctuation of 0.5 percent to 0.7 percent against the dollar “should be considered normal,” according to a separate report in the Shanghai Securities News, citing Chen Bingcai, a researcher at the Chinese Academy of Governance’s policy consultation department. The currency dropped 0.38 percent in November and gained 0.49 percent in October.
–Editors: Simon Harvey, James Regan
To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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