Yuan Falls


The yuan dropped by the most in more than a week after China approved new rules to curb illegal inflows of capital, reinforcing speculation currency gains will slow in the second half of this year.

The rules, effective immediately, give regulators greater authority to investigate currency payments, the State Council, the country's cabinet, said in a statement yesterday. The People's Bank of China fixed the reference rate for yuan trading weaker for a seventh day, the longest stretch since a peg against the dollar was scrapped in 2005.

The yuan fell 0.19 percent to 6.8614 a dollar as of 5:30 p.m. in Shanghai, from 6.8482 yesterday, according to the China Foreign Exchange Trade System.

The central bank has let the yuan weaken 0.1 percent since the start of July, following gains of 4.2 percent and 2.3 percent in the first and second quarters.

The yuan is allowed to trade by up to 0.5 percent against the dollar on either side of the daily reference rate, which was set at 6.8555 today.

Government bonds fell, with 10-year yields gaining the most in more than two weeks before a 20-year debt auction next week, the first for this year.

The finance ministry said today it postponed a scheduled auction of 24 billion yuan ($3.5 billion) of 20-year notes to Aug. 11 from tomorrow, because of a public holiday coinciding with the start of the Olympics in Beijing.

The yield on the 4.41 percent bond due June 2018 rose 7.1 basis points to 4.48 percent, the biggest gain since July 23, according to the China Interbank Bond Market. The price fell 0.56 per 100 yuan face amount to 99.44. A basis point is 0.01 percentage point.


TradingEconomics.com, Bloomberg
8/7/2008 6:45:47 AM