Yuan forwards rose for a fifth day, the longest winning streak since March, on speculation policy makers will combat inflation by letting the currency appreciate.
The People’s Bank of China set the currency’s reference rate 0.04 percent higher at 6.4661 per dollar, the strongest level since July 2005. Inflation may have quickened to 6.2 percent in June from 5.5 percent in May that was the fastest in 34 months, the Beijing-based China International Capital Corp. said in a report today.
“Curbing inflation remains the focus of the Chinese government policy this year,” said Tommy Ong, senior vice- president of treasury and markets at DBS Bank (Hong Kong) Ltd. “As interest-rate hikes and administrative measures harm economic growth, China would opt to let the yuan rise faster to lower imported inflation.”
Twelve-month non-deliverable forwards gained 0.05 percent to 6.3713 per dollar as of 5:10 p.m. in Hong Kong, a 1.4 percent premium to the spot rate, according to data compiled by Bloomberg.
The yuan rose 0.03 percent to 6.4629 per dollar as of the close at 4:30 p.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency touched 6.4605 on June 23, the strongest level since the country unified official and market exchange rates at the end of 1993. In Hong Kong’s offshore market, the yuan rose 0.04 percent to 6.4570.
The nation’s non-manufacturing purchasing managers’ index dropped to 57 in June from 61.9 a month earlier, the China Federation of Logistics and Purchasing said yesterday. A reading above 50 indicates expansion.
To contact the reporter on this story: Fion Li in Hong Kong at email@example.com
To contact the editor responsible for this story: Sandy Hendry at firstname.lastname@example.org