Yuan Strengthens a Third Day on Fixing, Foreign-Exchange Surplus

China’s yuan strengthened for a third day after the central bank raised the reference rate and as a report signaled a pickup in foreign-exchange inflows.

The People’s Bank of China raised the fixing by 0.03 percent to 6.2908 per dollar, the strongest level in a week. Chinese banks bought $125 billion of foreign currency from their clients and sold $117.2 billion last month, leaving a surplus of $7.8 billion, the State Administration of Foreign Exchange said today. Recent appreciation in the yuan was driven by a positive economic outlook, while expectations on currency gains “are basically stable,” SAFE said.

“The data follows the rebound of export growth in October, while some capital is still flowing in,” said Tommy Ong, a Hong Kong-based senior vice president of treasury and markets at DBS Bank (Hong Kong) Ltd. “We expect the central bank to set the fixing closer to the spot, with the latter ending the year at around 6.2 per dollar.”

The yuan climbed 0.05 percent to 6.2297 per dollar as of 10:12 a.m. in Shanghai, according to the China Foreign Exchange Trade System. One-month implied volatility for the yuan, a measure of exchange-rate swings used to price options, declined three basis points, or 0.03 percentage point, to 1.67 percent.

In Hong Kong’s offshore market, the currency gained 0.04 percent to 6.2310 against the greenback, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards slipped 0.02 percent to 6.3298, a 1.6 percent discount to the onshore spot rate.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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