June 25 (Bloomberg) -- The yuan sank to its weakest level in almost seven months, before closing little changed, after the People’s Bank of China lowered the currency’s reference rate amid concern Europe’s debt crisis will hurt exports.
The central bank set its daily fixing 0.3 percent weaker, the steepest cut since March 12, at 6.3230 per dollar, after strengthening the rate in the run-up to last week’s meeting of leaders from the Group of 20 nations. The Dollar Index, which tracks the greenback against six major counterparts, rose after completing its biggest weekly gain in a month.
“We have seen big moves in the U.S. dollar crosses,” said Robert Minikin, a senior strategist at Standard Chartered Bank in Hong Kong. The weaker fixing “represents the unwinding of the Group of 20 effect as we had a couple of unusually strong fixes heading into the G-20 last week,” he said.
The yuan closed at 6.3633 per dollar in Shanghai, little changed from 6.3642 at the end of last week, according to the China Foreign Exchange Trade System. It touched 6.3827 today, the weakest level since Nov. 29. The currency is allowed to trade as much as 1 percent on either side of the daily fixing.
Citigroup Inc. reduced its 2012 economic growth forecast for China to 7.8 percent from 8.1 percent, the bank wrote in a report on June 22, citing anemic domestic activity in the second quarter and a further weakening of European demand.
Twelve-month non-deliverable forwards dropped 0.06 percent to 6.4175 per dollar, a 0.8 percent discount to the onshore spot rate. In Hong Kong’s offshore market, the yuan gained 0.06 percent to 6.3698.
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