Yuan Snaps Three-Day Drop After Premier Wen Vows to Spur Growth

The yuan halted a three-day decline as the central bank strengthened the currency’s daily reference rate and Premier Wen Jiabao pledged to bolster economic growth.

The People’s Bank of China raised the reference rate by 0.15 percent, the most since May 2, to 6.3116 per dollar. The government will give “more priority to maintaining growth,” while it continues to implement “a proactive fiscal policy and a prudent monetary policy,” the official news agency Xinhua reported yesterday, citing Premier Wen.

“Wen’s comments provide hope to investors that the economy will rebound in the third quarter with government stimulus,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank.

The yuan rose 0.01 percent to close at 6.3279 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It gained as much as 0.15 percent, the most since April 17, to 6.3187 earlier. The currency is allowed to trade as much as 1 percent on either side of the daily fixing. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 2.2 percent.

In Hong Kong’s offshore market, the yuan strengthened 0.02 percent to 6.3255. Twelve-month non-deliverable forwards gained 0.03 percent to 6.3885, at 0.95 percent discount to the spot rate in Shanghai, according to data compiled by Bloomberg.

China will work to speed up approvals of qualified foreign institutional investors looking to buy its domestic securities, according to a statement posted on the State Administration of Foreign Exchange yesterday.

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

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

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