Offshore Yuan Drops as Manufacturing Gauge Slips, Outflows Seen

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The offshore yuan traded in Hong Kong dropped the most in more than a week as a private gauge of manufacturing in China declined to the lowest level in a year and data indicated capital is flowing out of the nation.

A preliminary Purchasing Managers’ Index came in at 49.2 for April, missing a Bloomberg survey’s 49.6 median estimate that was March’s final reading as well, according to data released Thursday by HSBC Holdings Plc and Markit Economics. Numbers below 50 indicate contraction. While China has been facing capital outflow pressures, the nation won’t consider new curbs, Guan Tao, head of the State Administration of Foreign Exchange’s international payment department, said in Beijing.

The offshore yuan fell 0.1 percent, the most since April 13, to 6.1962 a dollar as of 5:10 p.m. in Hong Kong, according to data compiled by Bloomberg. In Shanghai, the currency dropped 0.05 percent to 6.1980, China Foreign Exchange Trade System prices show. The People’s Bank of China strengthened its daily reference rate by 0.01 percent to 6.1281. The gap between the onshore yuan and the fixing was 1.1 percent, within the 2 percent limit allowed by the central bank.

“China’s economic slowdown is deepening, especially in the manufacturing sector,” said Liu Xuezhi, a Shanghai-based macro-economy analyst at Bank of Communications Co. “This is hurting the long-term prospects for the yuan, which will face strong depreciation pressure this year. More stimulus measures need to be rolled out in the first half of this year.”

Chinese banks sold a net 356.2 billion yuan ($57 billion) of foreign exchange for clients in March, up from 61.2 billion yuan in February, the State Administration of Foreign Exchange said on its website.

— With assistance by Tian Chen

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