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Yuan Posts Weekly Decline as Europe Debt Crisis Concerns Build

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April 20 (Bloomberg) -- China’s yuan had a weekly decline on speculation the global recovery will stall as Spain threatens to re-ignite Europe’s debt crisis.

The Chinese currency weakened for a third day after Spain auctioned 10-year debt to yield 5.74 percent yesterday, compared with 5.40 percent at the last sale on Jan. 19. The People’s Bank of China lowered the yuan’s fixing by 0.26 percent this week, the most since November.

“The market’s concern about the European debt crisis has worsened this week,” said Liu Dongliang, a senior analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender.

The yuan declined 0.09 percent this week to 6.3085 per dollar as of 4:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency fell 0.07 percent today. The central bank set the daily fixing 0.06 percent weaker at 6.3042.

The currency is allowed to trade as much as 1 percent on either side of the reference rate. China widened the band from 0.5 percent, effective April 16. The new trading band was untested in its first week.

One-month implied volatility for the yuan, a measure of exchange-rate swings used to price options, dropped 27 basis points this week to 2.03 percent, according to data compiled by Bloomberg.

In Hong Kong’s offshore market, the yuan declined 0.11 percent this week to 6.3075. Twelve-month non-deliverable forwards dropped 0.17 percent to 6.3433, a 0.6 percent discount to the onshore spot rate.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net