Yuan Forwards Decline as Fitch Warning Damages Export Outlook
Fitch said on Dec. 16 it was re-assessing rankings for France, Belgium, Spain, Slovenia, Italy, Ireland and Cyprus. A “comprehensive” solution to Europe’s crisis is “technically and politically beyond reach,” it said. The increasing flexibility of the yuan means China is on its way to a market- based exchange rate, China Business News reported today, citing Guan Tao, head of the State Administration of Foreign Exchange’s balance of payments department. The yuan jumped 0.4 percent on Dec. 16, the most in two months.
“While the People’s Bank of China signals it favors a stronger currency, traders and exporters have turned a bit more cautious today after the yuan rallied last Friday and on the worsening outlook in Europe,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd.
Twelve-month non-deliverable forwards fell 0.08 percent to 6.4095 per dollar as of 10:44 a.m. in Hong Kong, after gaining 0.7 percent on Dec. 16. The contracts were at a 1 percent discount to the onshore spot rate.
The yuan gained 0.02 percent to 6.3470 today in Shanghai, according to China Foreign Exchange Trade System. It touched 6.3294 on Dec. 16, the strongest level since China unified official and market exchange rates at the end of 1993. In Hong Kong’s offshore market, the yuan slipped 0.09 percent to 6.3790.
The People’s Bank of China set its daily reference rate 0.08 percent stronger at 6.3303 per dollar, the highest level in a week. The currency is allowed to trade as much as 0.5 percent on either side of the central bank’s fixing.
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