Print Date : Saturday, February 6, 2010
Yuan forwards slip as China seeks to cement economic recovery
Yuan forwards declined on speculation the Chinese government will refrain from allowing currency gains to help sustain the economy’s recovery. Bonds were little changed.
Central bank Deputy Governor Zhu Min said last weekend there were no immediate plans to let the currency strengthen and China would continue with its current accommodative fiscal and monetary policies. The government Thursday rejected President Barack Obama’s comments that the yuan should appreciate, saying its currency has little impact on the U.S. trade deficit.
“Overseas bets on the yuan’s appreciation have retreated recently,” said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the nation’s third-largest lender. “China won’t let the yuan gain very soon as the export sector is still the weakest component in contributing to economic growth.”
Twelve-month non-deliverable yuan forwards fell 0.1 percent to 6.6525 per dollar as of 5:36 p.m. in Hong Kong, according to data compiled by Bloomberg. The contracts reflected traders’ bets the currency will advance 2.6 percent from the spot rate of 6.8269.
Obama Wednesday said the U.S. would press China on the currency “to make sure that our goods are not artificially inflated in price and their goods” aren’t deflated.
The exchange-rate has “never been the major cause of the U.S. trade deficit,” China Foreign Ministry spokesman Ma Zhaoxu told reporters Thursday in Beijing. “Accusations and pressure will not help solve the issue.”
--------Earlier appreciation
China will keep its exchange rate stable this year, said Bank of China’s Shi. The nation has kept the yuan at about 6.83 per dollar since July 2008, after allowing its currency to strengthen 21 percent in the previous three years.
Vice Premier Li Keqiang reaffirmed the nation’s stable yuan policy on Jan. 28 at the World Economic Forum in Davos, Switzerland. Zhu, speaking Jan. 30 at the same meeting, said stability is important for China’s economy and that a “stable exchange rate” during a crisis “is good for China and good for the world.”
China’s Purchasing Managers’ Index was a seasonally adjusted 55.8 in January, after reaching a 20-month high of 56.6 in December, the Federation of Logistics and Purchasing reported this week in Beijing. A number above 50 indicates manufacturing expanded. Exports climbed 17.7 percent in December from a year earlier, the first increase in 14 months, official figures show.
China may let the yuan resume appreciation as early as March to help tame inflation as overseas sales recover from a slump and the U.S. and Europe step up calls for the currency to be allowed to strengthen, Zhang Ming, a state researcher wrote in an article published in the China Securities Journal.
___________Export rebound
The yuan may gain as much as 5 percent in 2010, wrote Zhang, deputy chief of the International Finance Research Center at the Chinese Academy of Social Sciences, which advises the government on economic policy.
“The rebound in exports means aggregate demand in China’s economy is headed into an overheating zone again,” he wrote. “It’s relatively difficult to tighten fiscal and monetary policies, while the yuan’s appreciation will help accomplish the same tightening effect.”
A stronger yuan would help damp inflation by lowering the local-currency cost of the raw materials China imports. Consumer prices rose 1.9 percent from a year earlier in December, the biggest increase since November 2008.
---------Bonds stable
Government bonds were little changed after the central bank kept its three-month bill yield unchanged for a second week in open-market operations Thursday.
The People’s Bank of China sold 42 billion yuan ($6.2 billion) of 91-day bills at a rate of 1.4088 percent. The monetary authority earlier this week offered one-year bills at 1.9264 percent, unchanged for a second week.
The yield on the 3.48 percent note due in July 2019 was 3.47 percent and its price was 100.08 per 100 yuan face amount, according to the National Interbank Funding Center.
The central bank injected capital into the financial markets for a third week. Net inflows rose to 220 billion yuan this week from 146 billion yuan a week earlier, according to data compiled by Bloomberg.
(Source: Bloomberg)
Yuan forwards slip as China seeks to cement economic recovery
Yuan forwards declined on speculation the Chinese government will refrain from allowing currency gains to help sustain the economy’s recovery. Bonds were little changed.
Central bank Deputy Governor Zhu Min said last weekend there were no immediate plans to let the currency strengthen and China would continue with its current accommodative fiscal and monetary policies. The government Thursday rejected President Barack Obama’s comments that the yuan should appreciate, saying its currency has little impact on the U.S. trade deficit.
“Overseas bets on the yuan’s appreciation have retreated recently,” said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the nation’s third-largest lender. “China won’t let the yuan gain very soon as the export sector is still the weakest component in contributing to economic growth.”
Twelve-month non-deliverable yuan forwards fell 0.1 percent to 6.6525 per dollar as of 5:36 p.m. in Hong Kong, according to data compiled by Bloomberg. The contracts reflected traders’ bets the currency will advance 2.6 percent from the spot rate of 6.8269.
Obama Wednesday said the U.S. would press China on the currency “to make sure that our goods are not artificially inflated in price and their goods” aren’t deflated.
The exchange-rate has “never been the major cause of the U.S. trade deficit,” China Foreign Ministry spokesman Ma Zhaoxu told reporters Thursday in Beijing. “Accusations and pressure will not help solve the issue.”
--------Earlier appreciation
China will keep its exchange rate stable this year, said Bank of China’s Shi. The nation has kept the yuan at about 6.83 per dollar since July 2008, after allowing its currency to strengthen 21 percent in the previous three years.
Vice Premier Li Keqiang reaffirmed the nation’s stable yuan policy on Jan. 28 at the World Economic Forum in Davos, Switzerland. Zhu, speaking Jan. 30 at the same meeting, said stability is important for China’s economy and that a “stable exchange rate” during a crisis “is good for China and good for the world.”
China’s Purchasing Managers’ Index was a seasonally adjusted 55.8 in January, after reaching a 20-month high of 56.6 in December, the Federation of Logistics and Purchasing reported this week in Beijing. A number above 50 indicates manufacturing expanded. Exports climbed 17.7 percent in December from a year earlier, the first increase in 14 months, official figures show.
China may let the yuan resume appreciation as early as March to help tame inflation as overseas sales recover from a slump and the U.S. and Europe step up calls for the currency to be allowed to strengthen, Zhang Ming, a state researcher wrote in an article published in the China Securities Journal.
___________Export rebound
The yuan may gain as much as 5 percent in 2010, wrote Zhang, deputy chief of the International Finance Research Center at the Chinese Academy of Social Sciences, which advises the government on economic policy.
“The rebound in exports means aggregate demand in China’s economy is headed into an overheating zone again,” he wrote. “It’s relatively difficult to tighten fiscal and monetary policies, while the yuan’s appreciation will help accomplish the same tightening effect.”
A stronger yuan would help damp inflation by lowering the local-currency cost of the raw materials China imports. Consumer prices rose 1.9 percent from a year earlier in December, the biggest increase since November 2008.
---------Bonds stable
Government bonds were little changed after the central bank kept its three-month bill yield unchanged for a second week in open-market operations Thursday.
The People’s Bank of China sold 42 billion yuan ($6.2 billion) of 91-day bills at a rate of 1.4088 percent. The monetary authority earlier this week offered one-year bills at 1.9264 percent, unchanged for a second week.
The yield on the 3.48 percent note due in July 2019 was 3.47 percent and its price was 100.08 per 100 yuan face amount, according to the National Interbank Funding Center.
The central bank injected capital into the financial markets for a third week. Net inflows rose to 220 billion yuan this week from 146 billion yuan a week earlier, according to data compiled by Bloomberg.
(Source: Bloomberg)