Yuan Completes Biggest Weekly Gain Since June After U.S. Steps Up Pressure
Yuan Heads for Biggest Weekly Gain Since June
Nelson Ching/Bloomberg
The currency gained 0.14 percent to 6.7738 per dollar as of 9:56 a.m. in Shanghai, bringing its weekly gain to 0.44 percent.
The currency gained 0.14 percent to 6.7738 per dollar as of 9:56 a.m. in Shanghai, bringing its weekly gain to 0.44 percent. Photographer: Nelson Ching/Bloomberg
Sept. 10 (Bloomberg) -- Andy Xie, an independent economist, discusses the outlook for China's economy and monetary policy. Xie talks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
The yuan completed its biggest weekly gain since June as the U.S. government stepped up pressure on China to allow its currency to strengthen.
The People’s Bank of China set the daily reference rate at a record high before a government report showed the nation posted a third straight trade surplus of more than $20 billion in August. U.S. Treasury Secretary Timothy F. Geithner said Sept. 8 that China should let the yuan rise more quickly.
“China’s move today amounts to political theater, a movement meant to keep the U.S. happy at a time when Geithner, the European Union and International Monetary Fund are all calling foul,” said Douglas Borthwick, Connecticut-based managing director at Faros Trading LLC. “We see this as tremendously important,” given the central bank action didn’t merely reflect moves in the dollar, he said.
The currency gained 0.21 percent to 6.7692 per dollar as of 5:30 p.m. in Shanghai, bringing its weekly gain to 0.5 percent, according to the China Foreign Exchange Trade System. That was the biggest gain since the week ended on June 25. The yuan appreciated 1.3 percent in the past five days to 8.6235 per euro.
Twelve-month non-deliverable forwards climbed 0.4 percent today and 0.5 percent this week to 6.6750 per dollar, the most since June, reflecting bets the currency will strengthen 1.4 percent, according to data compiled by Bloomberg.
Reference Rate
“It’s still a very modest move, and it could be reversed fairly easily,” said Ben Simpfendorfer, chief China economist at Royal Bank of Scotland Group in Hong Kong. “If the euro is to depreciate sharply against the dollar, it would be difficult to sustain this appreciation against the dollar, particularly with export growth slowing because Europe is still China’s biggest export market.”
Exports exceeded imports by $20.03 billion in August, compared with $15.7 billion in the same month a year earlier, the customs bureau said today. Overseas shipments growth slowed to 34.4 percent from 38.1 percent the previous month.
The yuan’s reference rate was set at 6.7625 today, the highest since a peg was scrapped in July 2005. It was up 0.28 percent, the most since June 25. The currency is allowed to move 0.5 percent on either side of that rate. Simpfendorfer said the yuan may rise to 6.7 by the end of this year.
The foreign ministry said that external pressure won’t dictate China’s currency policy as Larry Summers, President Barack Obama’s top economic adviser, visited Beijing this week.
The U.S. House Ways and Means Committee will discuss China’s currency policy next week. The yuan rose 0.8 percent since the central bank pledged to expand flexibility on June 19, ending a two-year resumption of the fixed exchange rate.
--Judy Chen, Frances Yoon. Editors: Sandy Hendry, Ven Ram
To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-7047 or xchen45@bloomberg.net.
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