China’s yuan advanced the most in three weeks on speculation the world’s two biggest economies will be more aggressive in stimulating growth after the International Monetary Fund trimmed its global forecast.
The Dollar Index has dropped 0.4 percent this week as investors bet that Federal Reserve Chairman Ben S. Bernanke will hint at further monetary easing at a testimony before Congress today. U.S. retail sales fell for a third month in June, declining 0.5 percent, Commerce Department figures showed yesterday. China’s State Council may this week detail easing measures to support growth, Nomura Holdings Inc. said yesterday. The China Securities Journal reported a meeting as early as July 18 may be followed by policy measures, citing unidentified analysts.
“The weak U.S. retail sales have spurred hopes of quantitative easing,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd. “Investors are also betting China will announce more stimulus measures and economic growth could regain momentum in the second half, boosting demand for the yuan.”
The currency rose 0.09 percent to close at 6.3729 per dollar in Shanghai, according to the China Foreign Exchange Trade System. That’s the biggest one-day gain since June 27. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped five basis points, or 0.05 percentage point, to 1.4 percent. That’s the lowest level since Sept. 1.
The People’s Bank of China raised the yuan’s reference rate 0.06 percent to 6.3167 per dollar. The currency is allowed to trade as much as 1 percent on either side of the fixing.
The IMF cut its 2013 global growth forecast to 3.9 percent yesterday from an April estimate of 4.1 percent, as Europe’s debt crisis slows expansion in emerging markets from China to India. Foreign direct investment in China dropped 3 percent in the first six months from a year earlier, the Ministry of Commerce said today.
In Hong Kong’s offshore market, the yuan appreciated 0.08 percent to 6.3735 per dollar. Twelve-month non-deliverable forwards advanced 0.08 percent to 6.4155, a 0.66 percent discount to the onshore spot rate, according to data compiled by Bloomberg.