Yuan Forwards Rise to Two-Month High as Economic Rebound Seen

Yuan forwards rose, touching the strongest level in almost two months, on speculation investors will boost holdings of Chinese assets to benefit from an economic rebound.

Growth will probably exceed 8 percent this year, compared with a 7.5 percent expansion target for 2012, and new yuan lending of more than 9 trillion yuan ($1.4 trillion) will be “enough to support” that, Chen Yulu, president of Renmin University of China and an adviser to the central bank, said yesterday in Beijing. Authorities may soon announce details for cross-border yuan loans in Qianhai, an area near Hong Kong, China Securities Journal reported today.

“The market is quite optimistic about reform and the economy is improving,” said Bruce Yam, a currency strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “More money is coming to China, which is a good investment choice given global monetary easing.”

Twelve-month non-deliverable forwards climbed 0.11 percent to 6.3038 per dollar as of 10:08 a.m. in Hong Kong, a 1.3 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The contracts reached 6.3015 earlier, the strongest level since Nov. 13, and advanced for a third day.

Exports rose 5 percent in December from a year earlier, compared with a 2.9 percent increase the previous month, according to the median estimate in a Bloomberg survey before official data due tomorrow. Economic growth slowed for a seventh quarter in the three months through September, expanding by 7.4 percent from a year earlier.

Fixing Weakened

The yuan was little changed at 6.2239 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China weakened the reference rate by 0.02 percent to 6.2814. 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 expected moves in exchange rates used to price options, held at 1.45 percent, according to data compiled by Bloomberg.

In Hong Kong’s offshore market, the yuan gained 0.03 percent to 6.2048 per dollar, according to data compiled by Bloomberg.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; 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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