China Yuan Has First Quarterly Drop Since 2009 on Slowing Growth
The yuan completed its first quarterly decline since December 2009 after Premier Wen Jiabaoset the annual growth target at the lowest level in seven years.
The currency rose today ahead of a factory report that is forecast to show a fourth month of expansion. A manufacturing purchasing managers’ index for March to be released on April 1 will show a reading of 50.8, according to the median estimate of economists surveyed by Bloomberg. On March 5, Wen set an economic growth target of 7.5 percent for 2012 asEurope’s debt crisis sapped demand for Chinese exports.
“Demand for the yuan has weakened this year as investors are worried about China’s economic outlook,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank. “The yuan is stronger today as people might expect a better PMI figure and see some value after a weak quarter.”
The yuan declined 0.06 percent to close at 6.2980 per dollar this quarter in Shanghai, according to the China Foreign Exchange Trade System. The currency strengthened 0.13 percent today, capping a weekly advance of 0.16 percent.
The People’s Bank of China set the yuan’s daily fixing 0.02 percent weaker today at 6.2943 per dollar, just 0.1 percent stronger than the 6.3009 on Dec. 30. The currency is allowed to move as much as 0.5 percent on either side of the fixing.
In Hong Kong’s offshore market, the yuan gained 0.08 percent today to 6.3113, extending the quarter’s advance to 0.5 percent. Twelve-month non-deliverable forwards traded at 6.3335, a 0.6 percent discount to the onshore exchange rate, according to data compiled by Bloomberg show.
Currency-Swap Deals
The yuan’s one-month implied volatility, a measure of exchange-rate swings used to price options, fell 0.1 percentage point today to 2.2 percent.
China has signed currency swap deals with Australia, Turkey, United Arab Emirates, and expanded agreements with Mongolia and Malaysia this year, as the world’s second-largest economy targets more widespread usage of the yuan in global trade and investment.
“These swap deals could bolster offshore demand for the yuan and is important for making the yuan a global currency,” said Lam. CCB International maintains a 3 percent appreciation forecast on the yuan by year-end, as the economy has “probably bottomed in the first quarter and will post stronger growth in the second half,” he said.
To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.
The currency rose today ahead of a factory report that is forecast to show a fourth month of expansion. A manufacturing purchasing managers’ index for March to be released on April 1 will show a reading of 50.8, according to the median estimate of economists surveyed by Bloomberg. On March 5, Wen set an economic growth target of 7.5 percent for 2012 asEurope’s debt crisis sapped demand for Chinese exports.
“Demand for the yuan has weakened this year as investors are worried about China’s economic outlook,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank. “The yuan is stronger today as people might expect a better PMI figure and see some value after a weak quarter.”
The yuan declined 0.06 percent to close at 6.2980 per dollar this quarter in Shanghai, according to the China Foreign Exchange Trade System. The currency strengthened 0.13 percent today, capping a weekly advance of 0.16 percent.
The People’s Bank of China set the yuan’s daily fixing 0.02 percent weaker today at 6.2943 per dollar, just 0.1 percent stronger than the 6.3009 on Dec. 30. The currency is allowed to move as much as 0.5 percent on either side of the fixing.
In Hong Kong’s offshore market, the yuan gained 0.08 percent today to 6.3113, extending the quarter’s advance to 0.5 percent. Twelve-month non-deliverable forwards traded at 6.3335, a 0.6 percent discount to the onshore exchange rate, according to data compiled by Bloomberg show.
Currency-Swap Deals
The yuan’s one-month implied volatility, a measure of exchange-rate swings used to price options, fell 0.1 percentage point today to 2.2 percent.
China has signed currency swap deals with Australia, Turkey, United Arab Emirates, and expanded agreements with Mongolia and Malaysia this year, as the world’s second-largest economy targets more widespread usage of the yuan in global trade and investment.
“These swap deals could bolster offshore demand for the yuan and is important for making the yuan a global currency,” said Lam. CCB International maintains a 3 percent appreciation forecast on the yuan by year-end, as the economy has “probably bottomed in the first quarter and will post stronger growth in the second half,” he said.
To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.
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