Yuan Forwards Gain as Central Bank Sets Stronger Reference Rate
July 14, 2010, 5:57 AM EDT
July 14 (Bloomberg) -- Yuan forwards strengthened after the central bank set the reference rate stronger, spurring speculation the authorities will permit more appreciation.
The People’s Bank of China set the so-called central parity rate 0.07 percent higher at 6.7755 per dollar, following the biggest decrease in two weeks yesterday. Most of Asia’s emerging-market currencies rose against the greenback today after a bond sale by Greece eased concern Europe’s debt crisis will derail a global recovery.
“It’s a mixture of a weaker dollar, better risk appetite and the steady lowering of the yuan fixing,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “Currently, the spot’s year-to-date annualized appreciation is running at about 1.5 percent. We expect room for it to run towards 2 percent.”
Twelve-month non-deliverable forwards climbed 0.13 percent to 6.6583 per dollar as of 5:54 p.m. in Hong Kong, reflecting bets the currency will gain 1.7 percent from the spot rate of 6.7745, according to data compiled by Bloomberg.
China’s overseas sales jumped 43.9 percent in June from a year earlier to $137.4 billion, the customs bureau said July 10. The trade surplus more than doubled to an eight-month high of $20 billion.
Ng said the yuan’s spot rate may appreciate to 6.6915 by the end of this year. The currency, which is allowed to trade up to 0.5 percent either side of the reference rate, has climbed 0.8 percent since China ended a two-year-old peg on June 19.
Bonds Advance
Government bonds gained for a third day after the finance ministry sold one-year notes at a lower yield than analysts forecast.
China’s June inflation rate was 2.9 percent, the 21st Century Business Herald reported today, citing market rumors. That would compare with 3.1 percent in the previous month. Growth in industrial production may have slowed to 13.6 percent from 18.5 percent, according to the newspaper.
The seven-day repurchase rate, which measures lending costs between banks, slid for a sixth day, the funding center data showed. The rate declined 19 basis points to 1.8 percent, the lowest level since May 20.
“June figures won’t look good, and slower economic outlook would further drive down bond yields,” said Hu Hangyu, a Beijing-based analyst with Citic Securities Co., China’s biggest listed brokerage. “A previous funds shortage has eased a lot with the repurchase rate sliding.”
The yield on the 2.83 percent government note due in May 2017 fell two basis points to 2.78 percent, and the price of the security added 0.12 per 100 yuan face amount to 100.30, according to the National Interbank Funding Center. A basis point is 0.01 percentage point.
July 14, 2010, 5:57 AM EDT
July 14 (Bloomberg) -- Yuan forwards strengthened after the central bank set the reference rate stronger, spurring speculation the authorities will permit more appreciation.
The People’s Bank of China set the so-called central parity rate 0.07 percent higher at 6.7755 per dollar, following the biggest decrease in two weeks yesterday. Most of Asia’s emerging-market currencies rose against the greenback today after a bond sale by Greece eased concern Europe’s debt crisis will derail a global recovery.
“It’s a mixture of a weaker dollar, better risk appetite and the steady lowering of the yuan fixing,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “Currently, the spot’s year-to-date annualized appreciation is running at about 1.5 percent. We expect room for it to run towards 2 percent.”
Twelve-month non-deliverable forwards climbed 0.13 percent to 6.6583 per dollar as of 5:54 p.m. in Hong Kong, reflecting bets the currency will gain 1.7 percent from the spot rate of 6.7745, according to data compiled by Bloomberg.
China’s overseas sales jumped 43.9 percent in June from a year earlier to $137.4 billion, the customs bureau said July 10. The trade surplus more than doubled to an eight-month high of $20 billion.
Ng said the yuan’s spot rate may appreciate to 6.6915 by the end of this year. The currency, which is allowed to trade up to 0.5 percent either side of the reference rate, has climbed 0.8 percent since China ended a two-year-old peg on June 19.
Bonds Advance
Government bonds gained for a third day after the finance ministry sold one-year notes at a lower yield than analysts forecast.
China’s June inflation rate was 2.9 percent, the 21st Century Business Herald reported today, citing market rumors. That would compare with 3.1 percent in the previous month. Growth in industrial production may have slowed to 13.6 percent from 18.5 percent, according to the newspaper.
The seven-day repurchase rate, which measures lending costs between banks, slid for a sixth day, the funding center data showed. The rate declined 19 basis points to 1.8 percent, the lowest level since May 20.
“June figures won’t look good, and slower economic outlook would further drive down bond yields,” said Hu Hangyu, a Beijing-based analyst with Citic Securities Co., China’s biggest listed brokerage. “A previous funds shortage has eased a lot with the repurchase rate sliding.”
The yield on the 2.83 percent government note due in May 2017 fell two basis points to 2.78 percent, and the price of the security added 0.12 per 100 yuan face amount to 100.30, according to the National Interbank Funding Center. A basis point is 0.01 percentage point.