Yuan Touches 2-Week Low as Economic Growth, Factory Output Slow
Gross domestic product rose 7.5 percent in the second quarter from a year earlier, compared with a 7.7 percent gain in the previous period and matching the median estimate in a Bloomberg News survey, according to official figures today. A report last week showed exports unexpectedly contracted 3.1 percent in June, the largest decline since 2009. The U.S. and China ended two days of strategic and economic talks last week.
“Yuan appreciation has come to an end as the export growth outlook remains grim,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “The window for depreciation from current levels has been opened given the U.S.-China talks are over. It’s time to shift focus back to fundamentals.”
The yuan closed at 6.1378 per dollar in Shanghai, little changed from 6.1375 at the end of last week, according to the China Foreign Exchange Trade System. That’s the lowest level since June 27. The People’s Bank of China weakened the daily reference rate 0.05 percent to 6.1663. The currency is allowed to trade a maximum 1 percent either side of the fixing.
In Hong Kong’s offshore market, the yuan gained 0.02 percent to 6.1389 per dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards climbed 0.07 percent to 6.2849, a 2.3 percent discount to the onshore spot rate.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, increased two basis points, or 0.02 percentage point, to 1.72 percent.
The yuan is the sole gainer among Asia’s 11 most-traded currencies this year, advancing 1.5 percent, and putting the nation’s exporters at a disadvantage over regional counterparts. Data today showed factory output increased 8.9 percent in June from a year earlier, compared with 9.2 percent in May.
U.S. Treasury Secretary Jacob J. Lew said China is committed to more reform of its exchange rate and to opening its economy to more foreign investment, speaking at the closing press conference of the U.S.-China Strategic and Economic Dialogue, in Washington.
To contact the reporter on this story: Fion Li in Hong Kong at firstname.lastname@example.org