HONG KONG: China's yuan flirted with fresh 18-month lows against the dollar on Wednesday as investors focused on a raft of negative news from the property sector as further evidence of a spreading slowdown in the economy.
Many property officials including the president of the country's biggest residential property developer China Vanke Co Ltd has said the days of rapid growth in the real estate sector are over, indicating a sustained government clamp down on speculative investment and easy credit has gained traction.
Investors fear the slowdown in the property sector is spreading quickly and washing over to the other parts of the economy. While economists do not see a hard landing at this point, concerns are growing that China may undershoot its growth forecast for the year.
China's annual economic growth slowed to an 18-month low of 7.4 percent in the first quarter, raising the risk that the world's second-largest economy could miss its growth target of 7.5 percent this year, for the first time in 15 years.
Those concerns have dominated recent data which have shown some stabilization in some sectors of the economy such as trade and industry as evident from recent PMI surveys. Real estate investments contribute 15 percent towards the economy.
"There is a lot of negative news around the property sector and that is hurting the currency and we may see more weakness unless there is more evidence of an economic turnaround," said a senior strategist at a European Bank in Hong Kong.
Spot yuan changed hands at 6.2586 per dollar near midday, weaker from Tuesday's close of 6.2486. The People's Bank of China (PBOC) fixed the midpoint at 6.1694, largely unchanged from Tuesday's close.
In early trades, the yuan threatened to fall below an April. 30 low of 6.2676 per dollar, its weakest since October 2012.
The Chinese currency has lost 3 percent against the dollar so far this year as the central bank attempts to flush out speculators, wiping out all its gains in 2013 and becoming one of the worst performers among its emerging market peers.
While the currency has rebounded in recent weeks thanks to the relatively higher yields available in Chinese debt, a slowdown in growth may trigger a policy easing by Beijing which could weaken investment-led demand for the currency.
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