Yuan Completes First Monthly Loss Vs Dollar Since May 2006

China's yuan had its first monthly loss against the dollar since May 2006 on speculation weaker global demand will prompt the government to limit currency gains to protect exporters.

Slower growth worldwide will weigh on China's exports in the second half of 2008, Vice Commerce Minister Gao Hucheng said yesterday. The yuan's 6.6 percent gain in the first half, which almost matched the advance for the whole of 2007, crimped profits at exporters and cooled sales abroad.

The yuan fell 0.05 percent this month to 6.8350 a dollar as of 5:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. It weakened 0.11 percent today, halting three days of gains.

China's exports may increase in the second half at the same pace as in the first six months of the year, Gao said at a press conference in Beijing yesterday. Overseas shipments rose 21.8 percent in the first half of 2008, slower than the 27.6 percent growth a year earlier.

The yuan is allowed to trade by up to 0.5 percent against the dollar either side of a daily reference rate, which was set at 6.8345 per dollar today.

China will start annual checks on how well domestic and foreign banks implement rules on foreign-currency controls, the State Administration of Foreign Exchange, the country's top currency regulator, said in a statement on its Web site today.

China's economy grew 10.1 percent in the second quarter, the fourth successive slowdown. Electricity output rose 12 percent in the first seven months, compared with a 17 percent a year earlier, according to China Electricity Council.

Yuan Completes First Monthly Loss Vs Dollar Since May 2006

TradingEconomics.com, Bloomberg
8/29/2008 9:20:12 AM