By Patricia Lui
Dec. 10 (Bloomberg) -- China’s yuan will decline next year as slowing economic growth may prompt China to increase measures to protect exporters, according to Royal Bank of Scotland Group Plc and Skandinaviska Enskilda Banken.
Investors should sell three-month yuan offshore forwards, Ben Simpfendorfer, a Hong Kong-based strategist for RBS, wrote in a report yesterday. SEB said sell 12-month contracts and Citigroup Inc. predicted China may weaken the yuan if November’s economic data “surprised substantially on the downside.”
A global recession and signs exports will slow further have spurred speculation that China will halt four years of currency gains from when a fixed exchange rate to the dollar ended in 2005. The $3.3 trillion economy expanded at the weakest pace in five years in the third quarter while a government report as early as today may show shipments rose by the least since February.
“The export sector will deteriorate significantly in the coming months while the risks of capital outflows and yuan depreciation grow,” Simpfendorfer wrote. He expects the yuan spot rate to remain unchanged in the next six months though “recent events argue for considering more extreme outcomes.”