Yuan completes worst week since March on global growth concerns
Updated: 2011-08-06 06:59
By Fion Li(HK Edition)
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China's yuan had the biggest weekly decline since March as stocks worldwide tumbled on concern the global economic recovery is stalling.
Asian stocks slid as economists predict US Labor Department data on Friday will show US employers added 85,000 jobs last month, failing to dent an unemployment rate of 9.2 percent. The People's Bank of China set its daily fixing 0.1 percent weaker at 6.4451 per US dollar ahead of factory output and inflation reports next week.
"Asian currencies fell as investors can't see what lies ahead and hence they are taking risks off the table," said Tommy Ong, senior vice-president of treasury and markets at DBS Bank (Hong Kong) Ltd. "The Chinese currency cannot avoid a decline on such a day."
The yuan fell 0.06 percent this week and 0.02 percent on Friday to close at 6.4404 per dollar, according to the China Foreign Exchange Trade System. In Hong Kong's offshore market, the currency declined 0.08 percent this week to 6.4353.
Twelve-month non-deliverable forwards dropped 0.05 percent this week and 0.24 percent today to 6.3872 per dollar. The contracts were at a 0.8 percent premium to the onshore spot rate, according to data compiled by Bloomberg.
China must stop buying US dollars, allow the yuan exchange rate to be decided by market forces "as soon as possible," and end its dependency on the US currency, Yu Yongding, a former central bank adviser, wrote in a commentary in the Financial Times on Friday.
The Asian nation's accumulation of dollar-denominated assets is vulnerable to a devaluation in the US currency, Yu wrote in the commentary. China can no longer invest in "paper assets" of developed countries as many are "simply printing money," Yu wrote.
China is the biggest foreign owner of US Treasuries, holding $1.16 trillion of the securities as of May, US Treasury Department data show.
Bloomberg
(HK Edition 08/06/2011 page2)