Markets

Yuan has longest losing streak in year

(Agencies)
Updated: 2010-08-16 14:26

The yuan weakened for a fifth day, the longest losing streak in a year, as slowing economic growth in China and Japan prompted investors to avoid emerging-market assets and favor the dollar.

China's industrial output climbed 13.4 percent from a year earlier in July, the smallest gain in 11 months, and bank lending increased by the least since March, government reports released in Beijing showed last week. Japan's gross domestic product rose an annualized 0.4 percent in the three months ended June 30 from a revised 4.4 percent expansion in the first quarter, the Cabinet Office said today in Tokyo. Local bonds fell, halting a three-day advance.

Related readings:  Mainland stocks fall to lowest in two weeks  Banks give out less new loans in July  China's yuan weakens against US dollar Thursday  Getting a handle on flow of hot money

"Safety-seeking sentiment is very strong in the market now as major economies all showed slowdown signs," said Liu Xin, an analyst at the Hong Kong branch of Bank of Communications Ltd, China's fifth-biggest lender. "The weaker yuan-dollar rate was obviously caused by a stronger dollar as the yuan has been floating against a currency basket."

The yuan declined 0.1 percent to 6.8033 versus the greenback as of 1:17 pm in Shanghai, according to the China Foreign Exchange Trade System. The currency's five-day decline, the worst performance since Aug 12 last year, trimmed gains to 0.3 percent since the central bank ended a two-year peg to the dollar on June 19. The monetary authority said it would manage the yuan against a basket of currencies.

China should continue to carry out its pledge on currency reform and increase the yuan's flexibility to accelerate economic restructuring, Xia Bin, a government economist and an adviser to the central bank, said in an interview with the People's Daily Overseas Edition Aug 13. More flexibility will also help reduce appreciation expectations, he said.