China’s yuan declined for a fifth day on concerns the worst cash crunch in a decade will aggravate an economic slowdown.
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 a jump 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 0.03 percent to close at 6.1470 to the greenback 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 0.07 percent to 6.1439 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards declined 0.11 percent to 6.3065 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, decreased three basis points, or 0.03 percentage point, to 1.88 percent.
The yuan remained the 13th most-used global payment currency in May, with an all-time high market share of 0.84 percent from 0.69 percent in April, the Society for Worldwide Interbank Financial Telecommunication said today.