Yuan forwards declined the most in a week on concern European leaders will struggle to contain the region’s debt crisis, dimming the outlook for global growth.
China’s economic growth will slow to 5 percent by 2016, from 9.5 percent last quarter, a Bloomberg poll indicated. The European Commission is resisting a push to impose bigger writedowns on bank holdings of Greek sovereign debt than those previously agreed on, a European official said. China may peg the yuan to the dollar or to a basket of currencies again if there is a global recession, Huang Yiping, Barclays Capital’s chief economist for emerging Asia, said in Beijing today.
“It’s a bad day as the strain in the euro zone intensifies,” said Tim Condon, Singapore-based head of Asian research at ING Groep NV. “Investors are putting risks off and the dollar is strengthening. There are also people who are worried that China may have a hard landing.”
Twelve-month non-deliverable forwards dropped 0.31 percent to 6.3850 per dollar as of 10:30 a.m. in Hong Kong, a 0.2 percent premium to the onshore spot rate, according to data compiled by Bloomberg.
The yuan fell 0.06 percent to 6.3977 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency has weakened 0.3 percent this month, paring its quarterly advance to 1 percent. The People Bank’s of China set its daily reference rate 0.07 percent weaker at 6.3665 per dollar. The currency is allowed to trade up to 0.5 percent either side of the reference rate.
In Hong Kong, the yuan slumped 0.39 percent to 6.4725, after strengthening 1 percent in the past three days, Bloomberg data show.
China halted a three-year, 21 percent advance in the yuan in July 2008 to help exporters weather a global recession. The currency has strengthened 7 percent since the central bank allowed appreciation to resume in June 2010.
Fifty-nine percent of respondents said China’s gross domestic product will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers showed.
The Obama administration views China’s currency as “substantially undervalued” and is reviewing legislation that aims to penalize the world’s second-largest economy, White House press secretary Jay Carney said yesterday.
The legislation would let U.S. companies seek duties on imports from China to compensate for the effect of a weak yuan, which lawmakers said gives Chinese companies an unfair advantage against U.S. manufacturers. Republican Senator Orrin Hatch of Utah has asked the administration to clarify its stance on the legality of the legislation before the Senate debates it next week.
-- Editors: Andrew Janes, James Regan
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