Offshore Yuan Declines Most in Three Weeks on Outflow Concern

China’s offshore yuan declined the most since Jan. 23 as the nation’s foreign-exchange regulator highlighted concerns over capital outflows.

China is increasingly finding itself in a situation similar to the 1998 Asian financial crisis with emerging markets under pressure from capital outflows as the dollar strengthens, Guan Tao, head of the State Administration of Foreign Exchange’s international payment department, said at a forum in Beijing on Feb. 14. There will be uncertainties this year while the nation remains attractive to long-term capital, SAFE said in a report Sunday.

The yuan traded in Hong Kong dropped 0.46 percent to 6.2709 a dollar, the lowest since Feb. 4, as of 5:35 p.m. local time, according to data compiled by Bloomberg. In Shanghai, the currency fell 0.13 percent, the most in two weeks, to close at 6.2485, China Foreign Exchange Trade System prices show.

“The capital outflow concern is causing fluctuations in the financial market and resulting in the drop in the yuan,” Chen Hufei, a Shanghai-based macroeconomic policy analyst at Bank of Communications, said by phone.

A net $324 billion flowed out of China in 2014, not counting foreign direct investment, swinging from inflows of $56 billion the previous year, according to UBS Group AG. The nation’s banks bought 914.5 billion yuan ($146 billion) of foreign currency and sold 985.9 billion yuan for clients in January, resulting in a deficit of 71.4 billion yuan, the State Administration of Foreign Exchange said in a statement Monday.

Trading Limit

The onshore yuan ended at a 1.94 percent discount to the central bank’s fixing, nearing the 2 percent limit and close to the 1.96 percent record. The People’s Bank of China raised the reference rate by 0.02 percent to 6.1273 a dollar. Twelve-month non-deliverable yuan forwards lost 0.24 percent to 6.3855, trading 2.15 percent weaker than the Shanghai spot rate.

The Bloomberg Dollar Spot Index has advanced 2.7 percent this year. China’s economy grew 7.4 percent in 2014, the weakest in 24 years, and imports fell 19.9 percent in January, the most in more than five years, according to government data.

“Investors are losing interest in the yuan and putting their money in more profitable products, like the dollar,” Banny Lam, the Hong Kong-based co-head of research at Agricultural Bank of China International Securities Co., said by phone.

— With assistance by Tian Chen

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