Yuan gains stall against firm dollar
THE yuan yesterday completed a third weekly loss on speculation China will favor a moderate pace of appreciation as industrial production grew at the slowest pace in six years on weaker export demand.
Gains in the currency, Asia’s best performer this year, stalled as the United States dollar index, which tracks the greenback against those of six trading partners, advanced 10 percent this quarter.
Production rose 12.8 percent in August from a year earlier, the statistics bureau said yesterday, after gaining 14.7 percent in July, Bloomberg News reported.
“Behind the yuan’s stalled gains is a firmer dollar and a change in policy makers’ focus to target growth,” said Patrick Bennett, a strategist with Societe Generale SA in Hong Kong. “The pace of gains in the first half was never likely to be sustained.”
The currency closed at 6.8450 a dollar in Shanghai as of 5:30pm yesterday, compared with 6.8465 on Thursday, according to the China Foreign Exchange Trade System. It weakened 0.04 percent for the week, paring this year’s gains to 6.7 percent.
China said on July 25 that maintaining economic growth was as important as controlling inflation.
The change in rhetoric and a rally in the dollar have kept the yuan little changed this quarter after a 4.2 percent advance in the first three months and a 2.3 percent gain in the second quarter.
David Cohen, director of Asian forecasting at Action Economics in Singapore, said the yuan’s gains against a basket of currencies including the euro and yen would continue as China’s economy remains robust.
The Chinese currency has strengthened 12 percent against the euro in the third quarter, following a 2.5 percent gain in the second quarter and a 3.2 percent loss in the first.
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