Yuan Completes Fourth Weekly Loss as PBOC Cuts Fixing Amid Fed

China’s yuan had a fourth weekly decline on speculation the U.S. will scale back asset purchases that have spurred inflows to emerging markets and after the central bank reduced the fixing.

The People’s Bank of China lowered the daily reference rate to 6.2871 per dollar, compared with 6.2846 yesterday. It was 0.12 percent weaker than Feb. 8, when markets closed for the week-long Lunar New Year holiday. Minutes of the Federal Reserve’s Jan. 29-30 meeting showed several policy makers said the U.S. central bank should be ready to vary the pace of its $85 billion of monthly bond buying.

“The weaker fixing does translate into less demand for the yuan,” said George Kwok, client manager at foreign-exchange dealing at Western Union Co. (WU) in Hong Kong. “There are concerns the Fed will reduce asset purchases but I don’t see a high chance as economic data has yet to suggest strong growth.”

The yuan fell 0.04 percent this week to close at 6.2351 per dollar in Shanghai, prices from the China Foreign Exchange Trade System show. It reached 6.2454 on Feb. 19, the lowest level since Dec. 14. Spot prices are allowed to diverge a maximum 1 percent from the reference rate.

The currency advanced 0.09 percent today as yuan funding was tighter than yesterday and with “good buying flow” from a local bank, Societe Generale SA’s Hong Kong-based strategist Wee-Khoon Chong wrote in a research note today.

Potential Curbs

China’s new home prices rose in most cities the government tracks in January, renewing concerns it will impose further curbs on real estate. Housing costs climbed in 53 of 70 cities, compared with 54 in December, according to data today from the National Bureau of Statistics.

In Hong Kong’s offshore market, the currency appreciated 0.11 percent today to 6.2350 per dollar, limiting its weekly loss to 0.26 percent, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards were little changed today at 6.3235, down 0.17 percent from a week ago. The contracts traded at a 1.4 percent discount to the onshore spot rate.

One-month implied volatility in the yuan, a measure of expected moves in the exchange rate used to price options, climbed two basis points, or 0.02 percentage point, to 1.28 percent this week, according to data compiled by Bloomberg.

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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