Yuan Falls on Signs China May Slow Gains to Safeguard Exports

China's yuan dropped for the first time in three days on speculation policy makers will slow the pace of currency gains to protect exporters. Bonds gained.

China's Ministry of Commerce has made a formal proposal to slow yuan appreciation and safeguard the nation's exports as overseas shipments grew at the slowest pace in four months, Reuters reported today, citing an unidentified official. The yuan fell by the most since June 4, making it the second-worst performer among the 10 most-active Asian currencies outside of Japan.

The yuan fell 0.16 percent to 6.8450 versus the dollar as of 5:30 p.m. in Shanghai, from 6.8340 at the end of last week, according to the China Foreign Exchange Trade System. It slumped as much as 0.25 percent after reaching 6.8253 earlier today, the strongest level since the dollar peg was scrapped.

The commerce ministry gave its recommendations in a report to the State Council after the ministry was asked last week to provide details of China's first-half trade performance and make policy suggestions, according to Reuters.

China's exports grew 17.6 percent in June from a year earlier, after gaining 28.1 percent in May, the customs bureau said on July 10. A global slowdown, rising production costs and a stronger yuan have hurt Chinese exports, threatening profits and jobs in the world's fastest-growing major economy.

Second-quarter gross domestic product may increase 10.3 percent, according to economists surveyed by Bloomberg News, slowing from the 10.6 percent pace in the first quarter. The statistics bureau is due to release the data on July 17.

China's foreign-exchange reserves, the world's biggest, climbed to a record $1.81 trillion at the end of June, the People's Bank of China said today on its Web site, fueling concern that inflows of speculative capital from abroad may push up the country's inflation.

Yuan Falls on Signs China May Slow Gains to Safeguard Exports

TradingEconomics.com, Bloomberg
7/14/2008 6:39:12 AM