China?s yuan fell, paring the week?s advance, after investors sought the relative safety of the dollar as Europe?s debt woes intensified.
The greenback rose versus 15 of the world?s 16 most-active currencies on concern Ireland will need to seek aid from the European Union to bail out its banks. The yuan dropped for the first time in four days as officials from the Group of 20 nations, who are pressing China for faster currency appreciation, start to wrap up talks in Seoul.
The yuan declined 0.3 percent to 6.6430 per dollar as of 4:51 p.m. in Shanghai, even after the People?s Bank of China set the reference rate at 6.6239, the strongest level since a peg ended in July 2005, according to the China Foreign Exchange Trade System.
?Yuan appreciation lost some momentum today amid heightened risk aversion, although the fixing by the PBOC was at the strongest level,? said Claudio Piron, head of emerging Asia foreign exchange and fixed-income strategy at Bank of America Corp.?s Merrill Lynch unit in Singapore.
Gross domestic product growth in Germany, Europe?s biggest economy, cooled to 0.7 percent in the third quarter from 2.3 percent in the second, the government reported today. Data due later may show GDP in the euro region slowed to 0.5 percent from 1 percent, according to a Bloomberg News survey of economists.
?Appreciate Faster?
China?s currency climbed to 6.6173 per dollar yesterday, the highest level since 1993, after government data showed inflation accelerated last month, fueling speculation the central bank will allow faster gains.
Consumer prices rose 4.4 percent from a year earlier, the most since September 2008, the statistics bureau reported. The trade surplus climbed to $27.2 billion, the highest in three months, customs data showed on Nov. 10
?Data is really telling us that the yuan can appreciate faster,? said Robert Minikin, a senior foreign-exchange strategist at Standard Chartered Plc in Hong Kong. ?It has been an opportune time for China to beef up yuan appreciation with the G-20 happening, but the question is what will happen next week.?
The yuan advanced for a second week, rising 0.2 percent, as G-20 officials converged in Seoul to address global imbalances in trade, with an official statement due later in the day as the two-day talks conclude.
President Barack Obama said China?s currency was ?undervalued? and that the world?s fastest-growing major economy spends an ?enormous? amount of money to keep the value of the yuan down. ?My expectation is that China is going to make progress on this issue,? he said at a press conference today.
?Still in Place?
China?s foreign-exchange reserves climbed to a record $2.65 trillion in September, the world?s largest, as the central bank bought dollars to temper gains in the yuan.
?The basic trend of yuan strengthening is still in place,? said David Cohen, a Singapore-based economist at Action Economics. ?This isn?t a shift in momentum, just another wiggle on the road to appreciation.?
Twelve-month non-deliverable forwards dropped 0.5 percent today to 6.4675 in Hong Kong, showing investors are betting on a 2.7 percent gain from the spot rate in a year.
--Sonja Cheung. Editors: Simon Harvey, Andrew Janes
To contact Bloomberg News staff for this story: Sonja Cheung in Hong Kong at +852-2977-6934 or scheung58@bloomberg.net
To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net
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