China’s Yuan Retreats From 19-Year High as PBOC Weakens Fixing

China’s yuan retreated from a 19-year high after the central bank weakened the currency’s reference rate.

The People’s Bank of China lowered the daily fixing by 0.04 percent to 6.2609 per dollar today as policy makers said the global economic outlook remains “complicated.” The yuan is allowed to trade 1 percent on either side of the reference rate. An official non-manufacturing Purchasing Managers’ Index rose to 55.6 in March from 54.5 in February, while the HSBC China Services PMI indicated the fastest expansion in six months, reports showed today.

The yuan fell 0.04 percent to close at 6.2010 per dollar in Shanghai, prices from the China Foreign Exchange Trade System show. The currency rose 0.15 percent to 6.1986 yesterday, the biggest gain since Dec. 13 and the strongest level since the government unified official and market exchange rates at the end of 1993.

“China data is signaling the economy is still in the early stage of a rebound,” said Sim Moh Siong, a strategist at Bank of Singapore. “The PBOC is under no pressure to go for faster yuan appreciation, especially with concerns surrounding the Europe and U.S. economies.”

Reports this week showed manufacturing in the U.S. grew slower than economists predicted for March, and unemployment in the 17-nation euro-area held at a record-high 12 percent in February.

‘Basically’ Stable

The central bank will keep the yuan “basically” stable, adopt prudent monetary policy and guide steady money and credit growth, according to a statement on its website. While the global economy is recovering, the condition remains complicated, it said without elaborating.

In Hong Kong’s offshore market, the Chinese currency traded at 6.1955 per dollar versus 6.1960 yesterday, data compiled by Bloomberg show. Twelve-month non-deliverable forwards rose 0.07 percent to 6.2840, a 1.3 percent discount to the spot rate in Shanghai.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points, or 0.04 percentage point, to 1.27 percent.

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