China’s Yuan Climbs to 19-Year High; Pares Gain on GDP Slowdown

China’s yuan rose to a 19-year high after the central bank set a record fixing against the dollar, before paring gains as the government reported an unexpected slowdown in economic growth.

The People’s Bank of China raised its daily reference rate by 0.08 percent to 6.2454 per dollar. The yuan is allowed to trade as much as 1 percent either side of the fixing. GDP increased 7.7 percent in the first quarter from a year earlier, official data showed today, less than 7.9 percent in the preceding three months and lower than the 8 percent median estimate in a Bloomberg survey.

The yuan gained 0.08 percent to 6.1871 per dollar in Shanghai, prices from the China Foreign Exchange Trade System show. It touched 6.1860 earlier, the strongest level since the government unified official and market exchange rates at the end of 1993. The currency has rallied in each of the last seven weeks, adding 0.7 percent in the longest winning streak since November.

“With growth looking OK but not great, there’s little incentive for China to accelerate the pace of yuan appreciation,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “This signals bearish tones for other markets, including high-beta currencies like the Aussie and commodities.”

Industrial production rose 8.9 percent in March, less than the 10.1 percent forecast in a Bloomberg survey, according to another report today. Retail sales advanced 12.6 percent, the same as projected in a separate survey.

Manufacturing, Services

Chinese manufacturing grew in March at the fastest pace in 11 months and services output also expanded, according to purchasing managers’ indexes published this month. China will keep the yuan “basically” stable, the central bank said on its website on April 3.

In Hong Kong’s offshore market, the Chinese currency was steady at 6.1860 per dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards rose 0.02 percent to 6.2565, a 1.1 percent discount to the spot rate in Shanghai.

One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, declined four basis points, or 0.04 percentage point, to 1.37 percent.

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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