Yuan Forwards Drop, Paring Weekly Gain, as Slowdown Woes Deepen

Yuan forwards fell for a third day, paring a weekly gain, as sliding property prices raised concern a slowdown in China’s economy is deepening.

New-home prices dropped in 69 of the 70 cities monitored by the government in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011. Prices fell in 68 cities in August. The People’s Bank of China cut its daily reference rate for the yuan by 0.01 percent to 6.1467 against the dollar.

Twelve-month non-deliverable forwards fell 0.02 percent to 6.2480 per dollar in Hong Kong, according to data compiled by Bloomberg. They were 2.1 percent weaker than Shanghai’s spot rate, which gained 0.03 percent today to close at 6.1172, China Foreign Exchange Trade System prices show. The forwards were steady this week.

“The data highlight the deepening of a downturn in the residential real-estate market and the downside risks to gross domestic product growth that it brings,” Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong, wrote in a note today. “It precedes the latest measures to boost mortgages and demand for housing, and therefore should not be taken at face value.”

All but five of the 46 cities that imposed limits on home ownership since 2010 have removed or relaxed such restrictions amid the property downturn that has dented local revenues from land sales. Gross domestic product expanded 7.3 percent last quarter from a year earlier, data showed on Oct. 21, compared with the 7.2 percent median forecast in a Bloomberg survey.

The offshore yuan was little changed at 6.1252 per dollar in Hong Kong today, taking this week’s gain to 0.3 percent, according to data compiled by Bloomberg. The Chinese currency’s onshore spot price was 0.48 percent stronger than the PBOC’s fixing. The spot price is allowed to deviate 2 percent on either side of the reference rate.

One-month implied volatility in the onshore yuan, a measure of expected swings used to price options, was unchanged at 1.95 percent.

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