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Yuan Forwards Drop to One-Month Low After Bernanke Says Economy Uncertain
Yuan forwards dropped to the weakest level in a month after Federal Reserve Chairman Ben S. Bernanke said the economic outlook is “unusually uncertain,” prompting investors to seek safety in the dollar.
Central bankers “remain prepared to take further policy actions” to aid growth, Bernanke said yesterday in testimony to the U.S. Senate Banking Committee. Fed policy makers trimmed their forecasts for U.S. growth and raised unemployment projections at their June 22-23 meeting. China’s economy expanded at a slower pace last quarter and inflation cooled.
“The weaker yuan forwards reflect bearish sentiment about the economic outlook in both the U.S. and China,” said Irene Cheung, director of local-markets trading at Royal Bank of Scotland Group Plc in Singapore. “Investors were cautious and bought back the dollar to reduce risks.”
The 12-month non-deliverable forward declined 0.2 percent to 6.7175 per dollar as of 10:31 a.m. in Hong Kong, the weakest level since June 17, according to data compiled by Bloomberg. It has dropped 0.9 percent in a six-day decline. The contracts reflected bets the currency will strengthen 0.9 percent from the spot rate of 6.7790, according to data compiled by Bloomberg.
China’s central bank set the yuan’s reference rate for daily trading 0.1 percent lower at 6.7859 per dollar today, the weakest this month. The currency has gained 0.7 percent since the central bank ended a two-year dollar peg on June 19 after holding the currency stable during the global financial crisis.
Slower Growth
A government report issued on July 15 showed the economy expanded 10.3 percent in the second quarter, slowing from growth of 11.9 percent in the previous three months. Inflation cooled to 2.9 percent in June from 3.1 percent in the previous month.
The U.S. initial jobless claims rose to 445,000 last week from 429,000 in the prior period, according to a Bloomberg News survey before a Labor Department report today. The National Association of Realtors will say sales of previously owned homes fell in June by the most this year, a separate survey showed.
The People’s Bank of China sold 80 billion yuan ($11.8 billion) in three-month bills at a yield of 1.5704 percent in open-market operations, unchanged for a fourth straight sale.
--Belinda Cao. Editors: Sandy Hendry
To contact Bloomberg News staff for this story: Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net
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