China’s yuan climbed to a 19-year high after the central bank strengthened the currency’s reference rate for the fourth straight day and exports growth beat forecasts.
Overseas shipments rose 5.1 percent from a year earlier in July after contracting 3.1 percent in June, official data showed today. That exceeded the median estimate of 2 percent growth in a Bloomberg survey. Imports (CNFRIMPY) advanced 10.9 percent, higher than the forecast of a 1 percent gain. The People’s Bank of China raised the daily fixing 0.04 percent to 6.1703 per dollar, the strongest since July 24.
“We are seeing more signs that China’s economy is stabilizing, and that’s positive for the yuan and its global usage,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. “Sentiment has improved on speculation that the leadership will roll out measures to support growth.”
The currency rose 0.05 percent to 6.1164 per dollar as of 11:39 a.m. in Shanghai, China Foreign Exchange Trade System prices show. That’s the strongest level since the government unified the official and market exchange rates at the end of 1993. The currency was at a 0.88 percent premium to the fixing, close to the maximum allowed 1 percent.
The yuan has gained 1.86 percent against the dollar this year, making it the best performer among 24 emerging-market currencies tracked by Bloomberg. The average yield on Dim Sum bonds fell to the lowest since June 20 this week on the yuan’s rally, a Deutsche Bank AG and Standard & Poor’s index shows. The nation’s foreign-exchange position may resume “moderate” growth, China Securities Journal reported, citing people it didn’t identify.
The yuan extended gains in the offshore market after China’s data. Twelve-month non-deliverable forwards rose 0.11 percent to 6.2700 per dollar in Hong Kong, a 2.4 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The offshore spot advanced 0.06 percent to a record 6.1144.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, fell three basis points, or 0.03 percentage point, to 1.2 percent. That’s the lowest since April 1.
“Trade data for July comes in much stronger than expected,” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a note today. “All this confirms our view that the economy has bottomed out and will re-accelerate in the second half. We’d like to call the end to worries over China for this year.”
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