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Yuan Drops Third Day on Signs China Seeks Stability Versus Currency Basket
The yuan weakened versus the dollar for a third day on signs China’s central bank is seeking to maintain stability against a basket of currencies after ending a two-year dollar peg in June.
The yuan was little changed in August against the basket of trade-weighted currencies, according to nominal effective rates compiled by Westpac Banking Corp. The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against the currencies of six major trading partners, gained 2 percent last month.
“The authorities have talked about the two-way market and the reference to a basket, and we’re seeing them right now,” said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd. “We need to pay more attention to China’s current-account surplus and monitor the yuan on a basket basis when we try to formulate the outlook for the yuan.”
The yuan dropped 0.08 percent to 6.8127 per dollar as of 11:24 a.m. in Shanghai, according to the China Foreign Exchange Trade System. Twelve-month non-deliverable forwards were little changed at 6.7210, reflecting bets the currency will advance 1.4 percent, according to data compiled by Bloomberg.
The People’s Bank of China set the yuan’s reference rate lower for a third straight day at 6.8126 a dollar, the weakest level since June 21. The currency is allowed to trade up to 0.5 percent either side of the fixing rate.
China’s Purchasing Managers’ Index rose to 51.7 in August compared with a 51.5 median forecast in a Bloomberg News survey of 17 economists. A separate PMI released by HSBC Holdings Plc and Markit Economics rose to 51.9 in August from 49.4 in July.
People’s Bank Deputy Governor Hu Xiaolian said changes in the yuan’s exchange rate won’t resolve the nation’s huge trade imbalance with the U.S., the Wall Street Journal reported yesterday.
The nation’s total trade surplus narrowed 21 percent in the seven months through July from the same period a year ago, and the first-half current-account surplus dropped 8 percent on year, according to China’s official data.
--Belinda Cao. Editors: Andrew Janes, 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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