Yuan Weakens for Fifth Day on Slowing Economic Expansion in Japan, China

The yuan weakened for the fifth straight 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 U.S. dollar.

Industrial output rose 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.

“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 6.8031 per dollar as of 9:47 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency’s five-day decline, the longest losing streak since Aug. 12 last year, has trimmed its gains to 0.3 percent since June 19, when the central bank ended a two- year peg to the greenback and let the yuan float against a basket of currencies.

Twelve-month non-deliverable forwards slid 0.1 percent to 6.6933, reflecting bets the currency will strengthen 1.6 percent from the spot rate in a year. The People’s Bank of China set the yuan’s reference rate at 6.8064 per dollar, the weakest level since June 24. The currency is allowed to trade as much as 0.5 percent either side of the daily fixing.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, last week rose 3.2 percent, the most in 14 weeks, to 82.948 on Aug. 13.

--Belinda Cao. Editors: Sandy Hendry