By Bloomberg News
The yuan traded near a two-month low against the U.S. dollar on speculation a seven-month slump in exports will deter China from allowing currency gains. Government bonds were little changed.
The Peoples Bank of China has allowed the yuan to weaken 0.12 percent this month after a report showed overseas shipments fell by a record in May. Premier Wen Jiabao said that the foundation for a rebound in the China economy isnâ€™t solid enough as foreign demand continues to decline, according to a statement on the State Council Web site on June 14. Without any improvement in exports in sight, the government wonâ€™t change the policy of holding the yuan stable, said Liu Dongliang, a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country s sixth largest lender. The currency traded at 6.8364 per dollar as of 5:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The spot rate touched 6.8395, the weakest since April 14. The yuan 12-month non-deliverable forwards lost 0.19 percent to 6.7375, according to data compiled by Bloomberg. The daily change in the yuan reference rate has been kept no more than 0.05 percent every day except for three days this year, signaling the central bankâ€™s determination to hold the yuan stable to aid exports. The rate was fixed at 6.8343 per dollar today. China exports dropped 26.4 percent last month from a year earlier, the customs bureau said on June 11. The biggest slump since Bloomberg started tracking the data in January 1995.
Foreign direct investment in China fell for an eighth month in May, sliding 17.8 percent from a year earlier, the commerce ministry said in Beijing today. Data that shows shrinking capital inflows through direct investments weakens tradersâ€™ appreciation expectation, said Wang Shutong, a Shanghai-based analyst at Bank of Communications Ltd., China s fifth-biggest lender. Government bonds were little changed amid speculation the economy is showing signs of recovery. Industrial-output growth in May accelerated to 8.9 percent and retail sales rose 15.2 percent, the statistics bureau said June 12. Traders donâ€™t have many opportunities to make profits, said Liu Jianyan, a bond analyst at First Capital Securities Co. in Shenzhen. June will likely outperform last month to confirm the economyâ€™s recovery, and the debt market will remain weak for the rest of the month. The yield on the 2.9 percent note due in December 2018 held at 3.08 percent, and the price of the security was 98.55 per 100 yuan face amount, according to Bloomberg Fair Value data.
--Judy Chen and Belinda Cao. Editors: Shanthy Nambiar, Sam Nagarajan