Yuan Set for Biggest Weekly Gain Since June on Record Surplus

China’s yuan headed for the biggest weekly advance since June as export growth that beat forecasts contributed to a record trade surplus.

Overseas shipments rose 14.5 percent from a year earlier in July, according to customs data today, compared with the median estimate in a Bloomberg survey for a 7 percent increase and June’s 7.2 percent advance. Imports fell 1.6 percent to give a trade surplus of $47.3 billion.

The yuan strengthened 0.38 percent this week to 6.1565 per dollar as of 11:03 a.m. in Shanghai, the biggest gain since the five days ended June 13, China Foreign Exchange Trade System prices show. The currency climbed 0.09 percent today.

“It’s quite clear sentiment on China has improved a lot,” said Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc in Hong Kong. The bank expects the currency to reach 6.09 per dollar by year-end, Cheung said.

The People’s Bank of China raised the yuan’s reference rate today by 0.18 percent, the most since July 10, to 6.1562 per dollar. That’s the strongest in almost three weeks.

The spot rate strengthened beyond the central bank’s fixing this week for the first time since its trading band was doubled to 2 percent on March 17 and was almost on par with the reference rate today.

In Hong Kong’s offshore market, the yuan rose 0.06 percent today and 0.21 percent this week to 6.1609 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards gained 0.06 percent to 6.2370 today, extending an advance since Aug. 1 to 0.19 percent. The contracts traded at a 1.4 percent discount to the Shanghai spot rate.

One-month implied volatility in the onshore yuan, a gauge of expected swings in the exchange rate used to price options, rose five basis points, or 0.05 percentage point, this week to 1.5 percent and was up by the same magnitude today.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Andrew Janes

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