Yuan Near 19-Year High as Exports Beat Estimates; Forwards Gain

China’s yuan strengthened to near its 19-year high as export growth exceeded forecasts and the nation’s central bank boosted the currency’s reference rate. Forwards advanced to a 10-month high.

Overseas sales rose 14.1 percent from a year earlier in December, official data showed today, compared with a 2.9 percent increase in November and the median estimate of a 5 percent gain in a Bloomberg survey. The People’s Bank of China raised the reference rate by 0.03 percent to 6.2793 per dollar, the strongest since May 2012. Inflation quickened to 2.3 percent last month from 2 percent in November, according to the median estimate of 43 economists before data due tomorrow.

“A recovery in exports is positive for China’s economy and hence the yuan,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. (23) in Hong Kong. “A stronger currency will help China to tame inflationary pressure, which is building up.”

The yuan rose 0.04 percent to 6.2236 per dollar as of 10:41 a.m. in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.2216 yesterday, the highest level since the government unified the official and market exchange rates at the end of 1993. The currency is allowed to trade as much as 1 percent on either side of the daily fixing.

The most-accurate forecasters for the yuan predict the currency will advance 2 percent, doubling last year’s gains as China seeks to encourage consumer spending.

In Hong Kong’s offshore market, twelve-month non- deliverable forwards climbed 0.16 percent to 6.2895 per dollar, a 1.1 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The contracts reached 6.2875 earlier, the strongest level since March 6, 2012. The currency gained 0.06 percent to 6.1990 per dollar.

One-month implied volatility in the yuan, a measure of expected moves in exchange rates used to price options, increased three basis points, or 0.03 percentage point, to 1.53 percent, according to data compiled by Bloomberg.

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

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

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