Yuan Falls as PBOC Sets Fixing at One-Month Low Amid Yen Concern

The yuan fell toward this year’s weakest level after the central bank set the currency’s daily reference rate at a one-month low amid concern a sliding yen will hurt China’s exports.

The People’s Bank of China reduced the fixing by 0.05 percent to 6.2881 per dollar today. The yuan is allowed to diverge a maximum 1 percent from the reference rate. The yen approached a three-year low after Bank of Japan Governor Masaaki Shirakawa said yesterday he will step down on March 19, allowing the government to hasten the selection of a replacement who will tackle deflation.

“China is monitoring the impact of a weak yen on its export growth,” said Stella Lee, president at Success Wealth Management Ltd. in Hong Kong. “Keeping the yuan from being too strong will help small and medium companies to recover quicker as the global economy starts improving.”

The yuan fell 0.04 percent to 6.2317 per dollar in Shanghai, prices from the China Foreign Exchange Trade System show. It touched 6.2337 earlier, approaching a Feb. 4 level of 6.2342 that was the weakest since Dec. 28. One-month implied volatility in the yuan, a measure of expected moves in the exchange rate used to price options, declined five basis points, or 0.05 percetange point, to 1.25 percent, according to data compiled by Bloomberg.

Offshore Markets

Taiwan will start offshore interbank trading of yuan today, Bank of China Ltd.’s Taipei branch said yesterday. Chinatrust Commercial Bank, a unit of Taipei-based Chinatrust Financial Holdings Co., will raise about $169 million selling yuan notes with maturities from two to five years that will be traded locally, the island’s Financial Supervisory Commission said yesterday.

In Hong Kong’s offshore market, the yuan was steady at 6.2158 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards dropped 0.07 percent to 6.3225 per dollar, trading at a 1.4 percent discount to the onshore spot rate.

The yuan has “appreciated significantly” against the dollar in the past several years and the U.S. wants continued, faster gains, Gary Locke, American ambassador to China, said yesterday in an interview with Bloomberg Television.

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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