Yuan Breaches 6.3 to Touch a Five-Month High on Global Stimulus

China’s yuan rose to a five-month high, breaching the 6.3 per dollar level, on speculation capital flows into emerging markets will quicken as policy makers in the world’s largest economies act to spur growth.

The Bank of Japan (8301) expanded its asset-purchase fund yesterday, joining the Federal Reserve and the European Central Bank in announcing plans to pump money into financial markets. The People’s Bank of China Governor Zhou Xiaochuan wrote in a commentary published in the Financial News this week that the central bank will keep the continuity and stability of monetary policies and at the same time make adjustments that are more forward-looking, targeted and effective.

“With quantitative easing in major economies, funds are flowing into Asia and China is among the top destinations,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. (23) in Hong Kong. “However, the yuan’s upside above the 6.3 level is limited as exporters are still facing great pressure.”

The yuan gained 0.20 percent to 6.2965 per dollar at 10:06 a.m. in Shanghai, according to the China Foreign Exchange Trade System. The currency, which can trade as much as 1 percent on either side of the central bank’s daily fixing, touched 6.2945, the strongest level since April 17. The PBOC set the reference rate 0.02 percent stronger at 6.3380 per dollar today.

Economic Outlook

China’s 2012 expansion will surpass the 7.5 percent growth target set earlier this year, Xinhua News Agency reported on Sept. 15, citing Fan Jianping, director of the Economic Projection Department at the State Information Center. Growth will stabilize in the second half as the government takes steps including faster approvals of major projects, Fan said.

Twelve-month non-deliverable forwards increased 0.15 percent to 6.4065 per dollar in Hong Kong, according to data compiled by Bloomberg. They traded at a 1.7 percent discount to the spot rate in Shanghai.

One-month implied volatility, a measure of exchange-rate swings used to price options, was little changed at 1.35 percent. In Hong Kong’s offshore market, the yuan rose 0.18 percent to 6.3094 today.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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