Yuan Near One-Week Low


The yuan traded near the lowest level in a week on speculation China will slow currency gains to aid exporters as the economy cools. Bonds were little changed.

The currency is headed for the second smallest monthly gain this year as a report last week showed the economy grew at the slowest pace since 2005 in the second quarter. The yuan's gains also have slowed as the dollar strengthens against the euro and the yen, currencies included in a basket against which China's central bank manages the exchange rate.

The currency, Asia's best performer this year, traded at 6.8289 a dollar as of 5:30 p.m. in Shanghai versus 6.8297 yesterday, according to the China Foreign Exchange Trade System. The central bank set a weaker daily reference rate today.

China's economy faces serious challenges and pressures from a global slowdown are increasing, Wang Chao, an assistant commerce minister, said at a press briefing in Beijing today.

The annual pace of expansion slowed to 10.1 percent in the second quarter from 10.6 percent in the previous three months as exports growth eased and the government curbed lending.

Industrial output in Shenzhen, a manufacturing hub for exporters, dropped 7 percent in the first half, as the yuan's strength crimped exports, the Shenzhen Daily reported today, citing the local statistics bureau. Between 300 and 400 foreign- funded companies moved out or closed down in the past six months, the English-language report said.

Government bonds were little changed amid speculation inflation is unlikely to slow in the second half of this year after a report last week showed producer prices rose at the fastest pace since Bloomberg started compiling data in 1999.

Producer prices climbed 8.8 percent in June from a year earlier, the statistics bureau said on July 17, after rising 8.2 percent in May.


TradingEconomics.com
7/24/2008 7:35:20 PM