Yuan Forwards Advance on PBOC Stronger Fixing, Bank Rules Delay

Yuan forwards strengthened for a second day as the central bank lifted the daily fixing after a delay in tightening capital-adequacy rules for banks.

China plans to introduce the new requirements for lenders at the beginning of next year, having said in August they would start being applied from Jan. 1, 2012. The People’s Bank of China raised the reference rate 0.14 percent, the most since May 21, to 6.3170 per dollar today. The Dollar Index weakened 0.6 percent yesterday as Federal Reserve Bank of Atlanta President Dennis Lockhart said more stimulus should be considered if it becomes clear U.S. growth is slowing.

“China is showing its determination to support growth as it ensures there’s bank capital to support lending demand,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. That’s positive for the yuan, he said.

Twelve-month non-deliverable forwards advanced 0.07 percent to 6.4145 per dollar as of 4:33 p.m. in Hong Kong, a 0.8 percent discount to the onshore spot rate, according to data compiled by Bloomberg.

China’s currency was unchanged at 6.3635 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The central bank’s reference rate was set 0.7 percent stronger than yesterday’s closing spot price. The currency is allowed to trade as much as 1 percent either side of the daily fixing.

In Hong Kong’s offshore market, the yuan climbed 0.03 percent to 6.3620. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 2.15 percent.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.