The Yuan Is Asia’s Weakest Currency 

(Bloomberg) -- The yuan fell after the People’s Bank of China set the daily reference rate weaker than expected, while stocks rebounded following their biggest sell-off in eight months as Chinese trade data beat estimates.

The yuan slid as much as 0.53 percent to 6.9250 per dollar after the central bank weakened the fixing for a ninth session. The offshore rate also fell. The Hang Seng Index rose 2.1 percent in Hong Kong, with Tencent Holdings Ltd. posting its biggest gain since 2015 after sliding for a record 10 days. Shanghai’s benchmark reversed morning losses to close 0.9 percent higher.

The fixing suggests “the PBOC isn’t concerned about yuan depreciation pressures,” as capital outflows are muted, said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. “Investors still prefer to buy dollars on the dip against the yuan, given the backdrop of the trade war, China’s economic slowdown and monetary easing.”

The yuan has fallen more than 9 percent against the dollar over the past six months, ranking among the world’s weakest currencies. Friday’s reference rate of 6.9120 per dollar was weaker than the average estimate of 6.9051 in a survey of traders and analysts. The psychologically key level of 7 is in view, with brokerages including Bank of America Merrill Lynch saying they expect the currency to fall through that line in coming months.

As the U.S. prepares to release its twice-a-year report on trading partners’ currencies next week, Treasury Secretary Steven Mnuchin has been advised by staff that China isn’t manipulating the yuan, Bloomberg reported, citing two people familiar with the matter. Mnuchin declined to comment on the report, saying the U.S. wants to make sure the yuan isn’t being used for competitive devaluation.

Trade tension doesn’t appear to have dented demand at home and abroad. China’s September exports in dollar terms rose 14.5 percent from a year earlier, beating the 8.2 percent forecast. Imports climbed 14.3 percent, leaving a trade surplus of $32 billion.

The Shanghai Composite Index, meanwhile, is among the world’s worst performing equity gauge this year, down 21 percent, as headwinds ranging from the trade war, an economic slowdown and weakening currency kept domestic investors on the sidelines. After tumbling the most since 2016 on Thursday, the benchmark fell as much as 1.8 percent Friday before reversing the loss. The Shenzhen Composite Index dropped 10 percent this week.

Foreign investors dumped 17 billion yuan ($2.45 billion) of mainland shares this week via trading links with Hong Kong, while Chinese investors were buyers of the city’s stocks.

Hong Kong fared better. The Hang Seng Index rose to 25,801.49 as companies from Tencent to Sunny Optical Technology Group Co. rebounded from heavy losses. The benchmark is still down for the week though after plunging the most since Feb. 6 on Thursday. Tencent jumped 8 percent after tumbling 19 percent over the previous 10 sessions. It’s still down almost 40 percent from January. The Hang Seng China Enterprises Index climbed 2.1 percent.

Brilliance China Automotive Holdings Ltd. was the worst performer of the day on the MSCI Asia Pacific Index, plunging by a record 27 percent after agreeing to give BMW AG control of their joint venture. A wide range of analysts cut their price targets and ratings on the company, saying it would diminish its exposure to future growth in the world’s largest auto market.

--With assistance from Ran Li, April Ma and Sofia Horta e Costa.

To contact the reporters on this story: Tian Chen in Hong Kong at tchen259@bloomberg.net;Emma Dai in Hong Kong at edai8@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Kana Nishizawa, Will Davies

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