The yuan completed its best week since May before Chinese officials meet their U.S. counterparts on economic and political issues this month.
Treasury Secretary Jacob J. Lew and Secretary of State John Kerry will meet Chinese government officials July 10-11 for the fifth round of the bilateral Strategic and Economic Dialogue. Exports (CNFREXPY) probably rose 3.9 percent in June, a Bloomberg survey showed before data due next week, quickening after a 1 percent gain in May while still trailing last year’s average growth of 8.3 percent. The yuan advanced 1.6 percent this year, the sole gainer among Asian currencies, data compiled by Bloomberg show.
Next week’s meeting is “a short-term catalyst” for yuan gains due to political pressure, according to Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “Yet, scope for further gains is limited on slower economic growth. China’s competitiveness has been harmed as the exchange rate is stronger relative to its Asian peers.”
The yuan rose 0.08 percent this week, the best performance since the five days ended May 24, according to China Foreign Exchange Trade System prices. The currency fell 0.11 percent today to close at 6.1326 per dollar, as the People’s Bank of China weakened the reference rate 0.06 percent to 6.1790.
The spot rate traded at 0.76 percent premium to the fixing, compared with the maximum allowed divergence of 1 percent.
Twelve-month non-deliverable forwards slipped 0.02 percent today and 0.12 percent this week to 6.2965 per dollar, according to data compiled by Bloomberg. The contracts are at a 2.6 percent discount to the spot rate. The offshore yuan traded in Hong Kong weakened 0.09 percent today to 6.1337, paring this week’s gain to 0.05 percent.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, decreased 17 basis points, or 0.17 percentage point, from a week ago to 1.64 percent, data compiled by Bloomberg show.
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