Yuan climbs toward 19-year high on improving economic outlook
China’s yuan climbed toward a 19-year high on speculation global investors will boost holdings of local assets as the world’s second-largest economy recovers from a seven-quarter slowdown.
The People’s Bank of China raised the daily reference rate by 0.03 per cent to 6.28840 per dollar. The yuan has tested the 1 per cent upper limit of its trading band on most days this month.
The exchange rate is tending toward equilibrium, PBOC Governor Zhou Xiaochuan was cited as saying in Caixin magazine. Remin University of China sees the economy growing eight per cent this year and 9.3 per cent in 2013, China Securities Journal reported on Monday, citing a report from the university’s research.
“Businesses are becoming more confident on China’s economy in the future,” said Bruce Yam, a currency strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “More funds are coming to Chinese markets as they are deemed as a safer place. But the PBOC doesn’t want the yuan to either appreciate or depreciate too much.”
The yuan advanced 0.06 per cent to 6.2255 per dollar at 10:06 am in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.2252 on November 14, the strongest level since China unified official and market exchange rates at the end of 1993. The currency can trade as much as 1 per cent on either side of the PBOC’s daily fixing.
A preliminary reading of China’s production was 50.4 in November, compared with 49.5 in October, according to a purchasing managers’ index released on November 22 by HSBC and Markit Economics. That was the first increase in 13 months. Fifty is the dividing line between expansion and contraction.
Twelve-month non-deliverable forwards increased 0.03 per cent to 6.3273 per dollar in Hong Kong, a 1.6 per cent discount to the spot rate in Shanghai, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan was little changed at 6.2268.