Narrower surplus hits yuan

Business | Bloomberg and Tracy Hu 9 Feb 2018

The yuan sank the most since the aftermath of the shock devaluation of the currency in August 2015 after trade surplus figures missed estimates and amid speculation that policy makers will step up efforts to rein in gains.

The onshore spot rate weakened 0.6 percent to 6.3195 against the dollar in the afternoon yesterday, after dropping as much as one percent earlier.

The currency extended losses after China reported a much narrower trade surplus than expected, on the back of a jump in imports. Volatility surged and the gap between onshore and offshore rates tripled compared with Wednesday.

The yuan's climb to a two-year high this week had fueled speculation officials may seek to curb one-way bets, and that they will grow more tolerant of capital outflows.

The foreign-exchange regulator said on Wednesday that it sees more noticeable two-way yuan moves.

A front-page Economic Daily commentary yesterday said more fluctuations are likely. China has resumed its Qualified Domestic Limited Partnership plan after a two-year halt, granting licenses to about a dozen global money managers that can raise funds in China for overseas investments. Data yesterday showed the nation's trade surplus stood at US$20.3 billion in January, less than half of the forecast figure, as imports jumped more than expected.

Meanwhile, Hang Seng Bank (0011) forecast yesterday the onshore yuan against the dollar will be at 6.3-6.4 at the end of this year as it expects the dollar to continue to weaken. That is lower than the range of 6.6-6.7 it estimated earlier.

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