Yuan Weakens as Greece Rating Cut Fuels Global Growth Concern
China’s yuan dropped after a Greek rating downgrade fueled concern the global recovery will stall, boosting demand for safer assets.
The MSCI Asia-Pacific Index (MXAP) of shares declined after Fitch Ratings lowered Greece’s credit grade by two levels to C from CCC yesterday, saying a default is highly likely in the near term. Oil prices, which touched a nine-month high yesterday, are also adding to concern that international economic growth will slow.
“The rating cut has damped market optimism but it won’t change the overall trend of appreciation,” said Liu Dongliang, a Shenzhen-based senior analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. He said the yuan may rise as much as 3 percent against the dollar this year.
The yuan fell 0.04 percent to 6.2985 per dollar as of 4:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The central bank weakened the reference rate by 0.07 percent to 6.3031. The currency is allowed to trade 0.5 percent either side of the daily fixing.
Twelve-month non-deliverable forwards strengthened 0.07 percent to 6.2825 per dollar, according to data compiled by Bloomberg. The contracts were at a 0.3 percent premium to the onshore spot rate. In Hong Kong’s offshore market, the currency was little changed at 6.2971.
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