Yuan Forwards Rise Most in Two Weeks on U.S. Recovery Doubts, Weak Dollar
Aug. 6 (Bloomberg) -- Nobel Prize-winning economist Joseph Stiglitz talked with Bloomberg's Rishaad Salamat yesterday about the outlook for China's economy. China’s economic growth eased to 10.3 percent in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation. Stiglitz also discussed the mainland's currency policy. Bloomberg's Susan Li also speaks. (Excerpt. Source: Bloomberg)
Aug. 6 (Bloomberg) -- Kenneth Heinz, president of Chicago-based Hedge Fund Research Inc., talks with Bloomberg's Susan Li about the outlook for the global hedge fund industry. Asian hedge funds had more than $360 million in new capital in the second quarter, reversing a net asset outflow in the first quarter, as the Chinese central bank took steps to increase flexibility of its currency policy, according to Hedge Fund Research. (Source: Bloomberg)
Yuan forwards strengthened as U.S. employment data fueled concern a recovery is losing steam in the world’s largest economy, weighing on the dollar.
The contracts also rose after the central bank set the reference rate for daily yuan spot trading at 6.7685 against the U.S. currency, the strongest level since China scrapped a decade-old dollar peg in July 2005. A government report tomorrow may show China’s exports climbed 35 percent in July, slowing from the 43.9 percent pace the previous month, according to a Bloomberg News survey of economists.
“The dollar’s general weakness is dominating the market,” said Liu Xin, an analyst at the Hong Kong branch of Bank of Communications Ltd., China’s fifth-biggest lender. “The reference rate shows the central bank is permitting appreciation, although at quite a slow pace.”
Twelve-month non-deliverable forwards strengthened 0.2 percent to 6.6686 per dollar as of 5:33 p.m. in Hong Kong, reflecting bets the currency will appreciate 1.5 percent from the spot rate of 6.7671, according to data compiled by Bloomberg.
The currency has advanced 0.9 percent since June 19, when China allowed the yuan to gain after keeping it at around 6.83 to the dollar since July 2008. Liu predicted the yuan will appreciate no more than 3 percent by the end of this year.
Consumer Prices
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and British pound, dropped 0.5 percent to a four-month low on Aug. 6. It was little changed today at 80.4 from 80.407 at the end of last week.
U.S. companies cut 131,000 workers in July, more than the median estimate of 65,000 lost jobs in a Bloomberg News survey, Labor Department figures showed on Aug. 6.
China’s government bonds were little changed before the statistics bureau released data on inflation and factory output this week.
Consumer prices rose 3.3 percent last month from a year earlier, compared with a 2.9 percent increase in June, according to the median estimate in a Bloomberg survey of economists. Industrial production growth slowed to 13.4 percent from 13.7 percent, a separate survey showed. The data are scheduled for release in Beijing on Aug. 11.
Bond Sales
The finance ministry sold 28.4 billion yuan ($4.2 billion) of three-year bonds for local governments today at a yield of 2.37 percent, three basis points higher than the 2.34 percent median forecast of analysts and traders. It also issued 18.6 billion yuan of five-year debt for provincial-level authorities at 2.67 percent, compared with the 2.65 percent median estimate.
“Bonds didn’t see any obvious moves before the data,” said Feng Xiaobo, a Shanghai-based fixed-income trader at Industrial Bank Co. “Local-government securities weren’t very popular because they should’ve carried a bigger margin than similar-dated securities of the central government.”
The yield on the 3.41 percent note due in June 2020 was little changed at 3.27 percent, and the price of the security was 101.17 per 100 yuan face amount, according to the National Interbank Funding Center.
--Judy Chen, Belinda Cao. Editors: Simon Harvey, James Regan
To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-7047 or xchen45@bloomberg.net. Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net
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