China’s yuan ends up vs dlr on officials’ comments

SHANGHAI - China’s yuan ended higher against the dollar for a second session on Wednesday after senior government officials’ comments fuelled expectations that Beijing may allow a short-term pick-up in the currency’s gains.



By (Reuters)

Published: Wed 21 Nov 2007, 6:23 PM

Last updated: Sat 4 Apr 2015, 11:20 PM

The yuan closed at 7.4110 to the dollar, up from Tuesday’s close at 7.4218 and within striking distance of its post-revaluation traded high of 7.4103, hit on Nov. 9.

Local foreign exchange dealers said they believed the yuan would keep rising in the short term after China’s central bank chief Zhou Xiaochuan said early this week that there was no plan to raise interest rates this week.

“This suggests the central bank will focus more on foreign exchange rate tools (to curb inflation) instead of interest rate tools,” said one dealer at an Asian bank in Shanghai.

“In this case, we believe the central bank may allow the currency to appreciate further and rise faster than before,” she added.

Comments by Chinese Premier Wen Jiabao in Singapore on Monday that China would increase the flexibility of the renminbi (yuan) rate and gradually achieve convertibility in the capital account also bolstered the yuan.

“There is no rule but this often happens: When our senior government officials are travelling abroad, the central bank may be happy to see a stronger yuan during the period,” said another dealer at a domestic bank.

Before the market opened on Wednesday, the central bank set its daily mid-point reference rate at 7.4150 to the dollar, up sharply from Tuesday’s 7.4255 and in line with market sentiment that Beijing may prefer a stronger yuan during Wen’s Singapore visit, dealers said.

Wen’s remarks were widely published in Chinese media on Tuesday and several banks issued research reports to clients suggesting this could be a positive signal from Beijing on yuan policy in the near term.

Dealers said the spot yuan rate was expected to continue to rise moderately this week, reflecting the central bank’s stronger mid-points.

One-year dollar/yuan non-deliverable forwards were at 6.8030/6.8090 in late trade on Wednesday, indicating appreciation of 8.90 to 9.00 percent in one year’s time from Wednesday’s mid-point, versus 8.94 to 9.05 percent late on Tuesday.

The 9.05 percent figure was the highest expectation of 12-month yuan appreciation in the NDFs since the revaluation in July 2005, setting a record for an eighth straight trading day.


More news from Business
In-store shopping regains trust

Business

In-store shopping regains trust

What is happening now is that as Covid-19 cases continue to decline, residents are regaining confidence in in-store shopping. This is according to a Kearney study in which UAE respondents cite convenience (51 per cent), enhanced shopping experience (49 per cent) and competitive pricing (44 per cent) as the main motivators driving them back to brick and mortar stores

Business4 days ago