Yuan forwards advanced after China’s manufacturing expanded at a faster pace in August and Premier Wen Jiabao said taming inflation tops the government’s agenda.
The Purchasing Managers’ Index was at 50.9 last month, from the 29-month low of 50.7 in July, the China Federal of Logistics and Purchasing said in a statement. A reading above 50 indicates expansion. The country’s top priority is stabilizing prices and the government doesn’t plan to alter the direction of economic policies, Premier Wen Jiabao wrote in an article in the ruling Communist Party’s Qiushi magazine published today.
“The PMI data shed positive light on China’s economic growth and it’s positive for the yuan,” said Banny Lam, an economist in Hong Kong at CCB International Securities, a unit of China’s second-biggest lender. “Yuan appreciation can also help ease inflationary pressure in China.”
Twelve-month non-deliverable forwards gained 0.05 percent to 6.2764 per dollar as of 4:43 p.m. in Hong Kong, a 1.7 percent premium to the onshore spot rate, according to data compiled by Bloomberg.
The yuan slipped 0.05 percent to 6.3813 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency touched 6.3705 on Aug. 30, the strongest level since the country unified the official and market exchange rates at the end of 1993.
In Hong Kong’s offshore market, the currency climbed 0.03 percent to 6.3543. The People’s Bank of China set the reference rate 0.01 percent stronger at 6.3859 per dollar. The currency is allowed to trade up to 0.5 percent on either side of the rate.
China faces increasing pressure for month-on-month gains in consumer prices, Shanghai Securities News reported today, citing Liu Shijin, deputy director of the State Council’s Development and Research Center. Liu said imported inflationary pressure has weakened “somewhat,” while cost-driven inflation is a longer-term phenomenon. Inflation reached a three-year high of 6.5 percent in July.