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Yuan Falls for a Fourth Day as PBOC Sets Fixing at Five-Week Low

China’s yuan fell for a fourth day after the central bank set the currency’s reference rate at a five-week low amid concern budget deficits in advanced nations will hurt the global economy.

The People’s Bank of China lowered the fixing for a sixth day, cutting it by 0.01 percent to 6.2949 per dollar, the weakest since Nov. 19. The spot is allowed to trade as much as 1 percent on either side of the fixing. Treasury Secretary Timothy F. Geithner said yesterday the U.S. government will hit its statutory debt ceiling on Dec. 31 and he will take steps to postpone a default by about two months, allowing more time for lawmakers to agree on a deficit-reduction deal.

“The central bank doesn’t favor any strong gains now as the export outlook remains uncertain with the fiscal problems in the U.S. and Europe,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. (23) The currency may climb as much as 2 percent in 2013, Lai said.

The yuan fell 0.03 percent to 6.2374 per dollar as of 9:54 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency has climbed 0.76 percent this quarter, contributing to a 0.9 percent advance for the year. That compares with a 4.7 percent appreciation in 2011.

In Hong Kong’s offshore market, the yuan traded at 6.2318 per dollar, compared with 6.2315 yesterday, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards dropped 0.04 percent to 6.3380 per dollar, a 1.6 percent discount to the onshore spot rate.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, has fallen 93 basis points, or 0.93 percentage point, to 1.8 percent this year. That’s lower than the past five years’ average of 2.35 percent. The gauge declined five basis points today.

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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