Yuan Fixing Cut Most Since March This Week Amid Dollar Advance

China’s central bank cut the yuan’s reference rate by the most since March this week after Japan’s expansion of monetary stimulus boosted the dollar.

The People’s Bank of China lowered the fixing by 0.06 percent to a two-month low of 6.1602 per dollar today, taking the decline since Oct. 31 to 0.23 percent. The yuan fell the most since September in both onshore and offshore trading as currencies weakened across Asia’s developing economies.

The Bloomberg Dollar Spot Index, which tracks the U.S, currency against 10 peers, has risen 2.5 percent since Oct. 30, the day before Japan announced it would increase its monetary base. This has put downward pressure on Asian currencies this week, most notably South Korea’s won and Malaysia’s ringgit.

“The fixing has been moved significantly weaker for the yuan, generally in line with the direction in the dollar against Asia,” said Sacha Tihanyi, a Hong Kong-based currency strategist at Scotiabank. “The yuan has been much more stable in trading, reflecting underlying trade flows.”

China will report trade figures tomorrow and the data are forecast to show exports rose 10.7 percent from a year earlier in October, down from 15.3 percent growth the previous month, according to the median estimate in a Bloomberg survey. The trade surplus is seen widening to $42 billion from $30.9 billion as imports are projected to have increased 5 percent, following a 7 percent gain in September.

Canada Deal

The yuan fell 0.17 percent today and 0.15 percent this week to 6.1229 per dollar in Shanghai, China Foreign Exchange Trade System prices show. It traded 0.6 percent stronger than the reference rate, within the 2 percent limit.

Twelve-month non-deliverable forwards fell 0.23 percent today to 6.2666 per dollar in Hong Kong, according to data compiled by Bloomberg. The offshore yuan fell 0.29 percent today to 6.1378.

Canadian Prime Minister Stephen Harper began a state visit to Beijing yesterday. He is expected to announce the setting up of a trading hub for the yuan in Canada, according to a person familiar with the matter who asked not to be identified because they’re not authorized to speak publicly. The deal will allow direct exchange of the two nations’ currencies, the person said.

Countries around the world have been racing to become designated hubs for the yuan as China’s rise to become the world’s biggest goods trading nation saw turnover in its currency more than triple to $120 billion a day between 2010 and 2013, according to the Bank of International Settlements.

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