Yuan Declines for Fifth Day on Concern Over China’s Growth

China’s yuan declined for a fifth day on concerns the worst cash crunch in a decade will worsen a slowing economy.

HSBC Holdings Plc said yesterday it sees the currency ending the year at 6.16 per dollar, 0.2 percent weaker than current levels, as jumps in money-market rates may hurt growth and inflation expectations. Chinese stocks fell to a four-year low today after Goldman Sachs Group Inc., China International Capital Corp. and DBS Bank Ltd. cut 2013 expansion forecasts in the past week. One-year interest-rate swaps slid after the central bank said yesterday it will safeguard money-market stability. The swaps rose to a record 5.06 percent on June 20.

“The PBOC statement shows the risks are still controllable and there won’t be any big crisis in the near term,” said Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “Yet, the room for yuan appreciation is still limited as growth is on the downtrend. The slowdown could be faster than what people expect.”

The yuan fell 0.04 percent to 6.1478 per dollar as of 11:29 a.m. in Shanghai, China Foreign Exchange Trade System prices showed. The People’s Bank of China lowered the currency’s fixing 0.02 percent to 6.1779 per dollar today. The onshore spot rate is allowed to diverge from the reference by a maximum of 1 percent.

In Hong Kong’s offshore market, the yuan fell 0.09 percent to 6.1455 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards declined 0.06 percent to 6.3030 per dollar, a 2.5 percent discount to the onshore spot.

One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, rose one basis point, or 0.01 percentage point, to 1.91 percent.

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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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