Yuan Forwards Gain on Stronger Fixing; Goldman Upgrades Growth

Yuan forwards gained for a second day after China’s central bank set a stronger reference rate and amid speculation capital inflows will increase after the government eased investment limits.

The People’s Bank of China raised the yuan reference rate for a second day to near a two-week high and a government report today showed new home prices increased in 53 of 70 major cities in November. Goldman Sachs Group Inc. boosted its economic growth forecasts for the current quarter and 2013, citing a recovery in manufacturing. China announced on Dec. 14 measures granting foreign sovereign wealth funds and central banks wider access to local capital markets.

“We are still positive on the yuan in view of the recent economic rebound and potential for more capital inflows,” said Irene Cheung, a currency strategist in Singapore at Australia & New Zealand Banking Group Ltd. “The stock market has been doing well too.”

Twelve-month non-deliverable forwards gained 0.04 percent to 6.3125 per dollar as of 10:25 a.m. in Hong Kong, according to data compiled by Bloomberg. The central bank set its reference rate at 6.2880, the strongest level since Dec. 5. The currency gained 0.03 percent to 6.2332 in Shanghai, according to China Foreign Exchange Trade System. The exchange rate was 0.06 percent stronger at 6.2108 in Hong Kong’s offshore market.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped nine basis points, or 0.09 percentage point, to 1.86 percent, according to data compiled by Bloomberg.

Goldman raised its fourth-quarter economic growth forecast to 7.8 percent from 7.6 percent to account for stronger production in October and November, it said in a report today. Its projection for 2013 was increased to 8.2 percent from 8.1 percent. Industrial output rose 10.1 percent in November from a year earlier, the most since March, the government said on Dec. 9.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

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