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PIMCO’s Baker Says Yuan Will Gain More Than Forwards Indicate

Brian Baker, the Hong Kong-based head of Asia ex-Japan for Pacific Investment Management Co., commented on the outlook for the Chinese yuan and other Asian currencies.

The yuan fell 0.17 percent to 6.3435 per dollar in the 12- month non-deliverable forwards market as of 3:49 p.m. in Hong Kong, reflecting bets the currency will gain 2.9 percent in a year from the onshore spot rate of 6.5246.

“We are very constructive on China. We believe that the renminbi will continue to appreciate. It will appreciate more than the forward market has priced it in. The Chinese interest rates will have to rise further to control inflation. We are participating in the non-deliverable forward yuan market. We do not invest in the domestic bond market.

“Asian currencies will appreciate against the dollar because their interest rates are rising. As oil and commodity prices go up, it affects Asian inflation the most. They have to raise interest rates and allow their currencies to appreciate to fight inflation. We have large currency exposure in Singapore and South Korea.”

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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