June 8 (Bloomberg) -- China’s yuan forwards declined for a fifth day, the longest losing streak in seven weeks, on speculation sliding exports will keep the central bank from allowing currency appreciation to resume.

Traders reined in bets on how much the currency will gain over the coming year after the People’s Bank of China set the reference rate for onshore yuan trading at the weakest level in two months against the dollar. Economists surveyed by Bloomberg forecast a government report this week will show exports dropped 23 percent in May, a seventh straight decline.

“The yuan’s spot rate will stay at around the current level as foreign demand is still quite weak,” said Liu Xin, an analyst in Hong Kong with Bank of Communications Ltd., China’s fifth-biggest lender. “The extending of an export slump will increase downside risks for non-deliverable forwards.”

The yuan’s 12-month forwards contracts slid 0.3 percent to 6.7140 per dollar as of 10:28 a.m. in Shanghai, according to data compiled by Bloomberg. In the spot market, the yuan traded at 6.8359, little changed from 6.8330 at the end of last week, according to the China Foreign Exchange Trade System.

Liu said recent dollar gains contributed to the slide in yuan forwards contracts.

ICE’s Dollar Index, which tracks the greenback against the currencies of six major trading partners, jumped 1.7 percent on June 5, the most since January, on signs a recession is easing in the world’s biggest economy. A government report that day showed U.S. job cuts slowed to 345,000 in May, down from 504,000 the previous month and less than the 520,000 forecast by economists in a Bloomberg survey.

To contact the reporters on this story: John Liu in Shanghai at jliu42@bloomberg.net.

Last Updated: June 7, 2009 22:42 EDT