Azernews.Az

By Bloomberg

China’s yuan was poised for a third monthly decline on signals the world’s second-largest economy is slowing and as demand for the U.S. dollar picked up.

The People’s Bank of China weakened the currency’s fixing by 0.3 percent in January, the most since March last year. The Bloomberg Dollar Spot Index rose 2.9 percent this month as monetary easing in Europe and Japan boosted demand for the greenback. China’s industrial profits recorded the biggest retreat in at least three years in December, while foreign- exchange reserves fell for a fourth month.

The yuan slid 0.75 percent in January, extending a three- month loss to 2.2 percent, according to prices from the China Foreign Exchange Trade System. It fell 0.06 percent Friday to 6.2505 a dollar as of 10:48 a.m. in Shanghai, set for a weekly decline of 0.34 percent. The currency traded at a 1.81 percent discount to the central bank’s fixing of 6.1370, close to the 2 percent daily limit.

“A combination of reasons, including the stronger U.S. dollar, the slowing Chinese economy and capital outflows have been making the yuan weaker in the past three months,” said Chen Hufei, a Shanghai-based macroeconomic policy analyst at Bank of Communications Co, the nation’s fifth-largest lender. “I expect the PBOC to stabilize the yuan’s value with looser policies, such as widening its trading band, before the Chinese New Year holiday.”

Economic Data

Industrial profits in China declined 8 percent in December from a year earlier, the National Bureau of Statistics said in Beijing on Jan. 27. That’s the biggest drop since at least October 2011, according to data compiled by Bloomberg. Foreign- exchange reserves were at $3.84 trillion at the end of December, the lowest level in a year.

The official Purchasing Managers’ Index for manufacturing will probably come in at 50.2 for January, compared with 50.1 in December, a Bloomberg survey shows before data due Feb. 1. A figure above 50 indicates expansion.

A key barometer of foreign-exchange flows on the central bank’s balance sheet, known as its yuan positions, fell 128.9 billion yuan ($21 billion) in December from a month earlier, the most since 2003, PBOC data show.

In Hong Kong’s offshore trading, the yuan declined 0.58 percent this month and 0.06 percent Friday to 6.2595 a dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards were heading for a monthly loss of 0.4 percent at 6.3660. The contracts traded at a 1.8 percent discount to the spot rate in Shanghai.