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Offshore yuan drops as China exports decline

The yuan trade in Hong Kong plunged the most in the last one month after China's exports fell unexpectedly.

Offshore yuan drops as China exports decline

The sudden fall has led to speculations that policy makers would favor a weaker exchange rate. Overseas sales went down the most in more than a year in March while imports dropped as well and it has left the trade surplus at the least in 13 months. The yuan has gained against 25 of 31 major currencies this year.

"The trade data are a blow to market optimism that China's economy is in recovery," said Stella Lee, president of Success Wealth Management Ltd. in Hong Kong. "Concern that China will curb the yuan's strength is also weighing on the currency."

According to data compiled by Bloomberg, the offshore yuan dropped 0.16 percent, the most since March 13, to 6.2276 a dollar as of 4:45 p.m. in Hong Kong. In Shanghai, the currency declined 0.12 percent to close at 6.2167, China Foreign Exchange Trade System prices show. The People's Bank of China cut its daily fixing by 0.04 percent to 6.1395.

The gap between the onshore spot rate and the fixing was 1.26 percent, within the 2 percent limit.

Chinese Prime Minister Li Keqiang recently said that his country's economy was facing increasing downward pressure and the government could announce policies to stabilize growth this quarter.
The official data released today showed that exports fell 15 percent from a year ago in March, while the trade excess came in at $3.08 billion, missing the median forecast of $40.1 billion.

The Chinese currency is going to account for 10 percent of world reserves by 2025 with Asian monetary authorities showing the most support. The yuan will make up an estimated 2.9 percent of foreign-exchange stockpiles by the end of this year, based on the Central Banking Publications survey sponsored by HSBC Holdings Plc.