China’s yuan fell for the third week in a row, the longest losing run this year, as weak economic data fueled bets for further easing and a compiler of equity indexes decided not to include mainland shares in its benchmarks.
China’s exports declined in May and imports slumped for a seventh month, official figures showed on Monday. Consumer prices rose by a less-than-estimated 1.2 percent, signaling weak demand. New York-based MSCI Inc. deferred a decision on including yuan-denominated stocks to its global indexes, citing investor concerns such as accessibility and capital mobility.
“The yuan faces depreciation pressure as China will announce more easing measures to inject liquidity and bolster the economy, which hasn’t bottomed out yet,” said Zhu Lixu, an analyst at Xiangcai Securities Co. in Shanghai. “MSCI’s deferral hurt market sentiment and was a setback for the yuan’s internationalization.”
The onshore yuan, which is constrained by a daily central bank fixing, dropped 0.08 percent this week and 0.03 percent Friday to close at 6.2081 a dollar in Shanghai, according to China Foreign Exchange Trade System prices.
China could cut reserve-requirement ratios this weekend by as much as 100 basis points to 17.5 percent, according to China Merchants Bank Co. analyst Liu Dongliang, as the nation seeks to spur economic growth and boost cash supply to counter a surge in municipal bond sales. The People’s Bank of China has reduced its benchmark one-year lending rate three times since November and lowered reserve ratios twice this year.
The offshore yuan in Hong Kong, which is free from the mainland’s capital controls, was at 6.2122 a dollar, little changed from June 5 and Thursday, according to data compiled by Bloomberg.
The central bank cut the yuan’s daily reference rate by 0.03 percent on Friday, the first time in four days, to 6.1167 a dollar. The gap between the onshore yuan and the fixing was 1.5 percent, within the 2 percent daily limit.
Overseas shipments fell 2.8 percent from a year earlier last month in yuan terms. Imports slid 18.1 percent. China’s economy expanded 7 percent last quarter, the least since 2009.
— With assistance by Tian Chen