By Judy Chen and Kim Kyoungwha
Sept. 18 (Bloomberg) -- China's yuan declined, following the biggest gain in seven weeks yesterday, on speculation the government is limiting the currency's appreciation as the economy slows and financial turmoil escalates.
Non-deliverable forwards contracts show traders are betting the yuan will weaken against the dollar over the next year. China has slowed the yuan's gains this quarter as the country's gross domestic product rose 10.1 percent in the three months through June, the smallest increase since 2005.
``Investors speculate that the government has stopped the appreciation to boost the economy,'' said Liu Dongliang, a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the nation's sixth-largest lender. ``The yuan has much downward pressure in the short term.''
The yuan weakened 0.11 percent to 6.8445 against the dollar as of 10:24 a.m. in Shanghai, from 6.8370 yesterday, according to the China Foreign Exchange Trade System.
Non-deliverable forwards contracts indicate the yuan will drop 0.7 percent to 6.8950 per dollar in the next twelve months. Forwards are agreements in which assets are bought and sold at current prices for settlement at a later-specified time and date.
To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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