Yuan falls amid fears of change

China’s yuan fell against the dollar today following the announcement that the Chinese central bank is going to buck the trend and change the yuan’s one-way appreciation.

Prior to trading, the daily yuan mid-point was down against the dollar at 6.8271, from 6.8238 on Friday, which is the third consecutive day of falls as the currency declined 0.21 percent.

Although the Yuan is Asia’s best performer this year, China’s economic growth has cooled in the second quarter and there is increasing pressure on authorities to change its policy from fighting inflation and slow currency gains to aid exporters as the economy slows.

Nizam Idris, a currency strategist with UBS AG in Singapore, said that it now seems likely that the People’s Bank of China will slow down appreciation as inflation is easing and export numbers are falling.

It is likely that the yuan’s advance of 4.2 percent in the first quarter of 2008 in not likely to be experienced again in the near future.

China is allowing gains against currencies of its major trading partners to stem inflation that slowed to 7.1 percent in June, which is the lowest in over 5 years as the battle against inflation is seemingly under control.

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