Yuan Forwards Advance on Stronger Fixing After Factory Data

Yuan forwards gained after China’s central bank set a stronger fixing and reports on factory output and consumer spending added to signs the world’s second-largest economy is recovering.

Industrial production climbed 10.1 percent in November from a year earlier, and retail sales growth accelerated to 14.9 percent, beating economists’ estimates in Bloomberg surveys, the statistics bureau said yesterday. Inflation was 2 percent, quickening from a 33-month low of 1.7 percent in October. Export data released today showed external demand for the nation’s goods is weakening amid the global slowdown. The People’s Bank of China strengthened the reference rate for the first time in three days.

“The market is still expecting some gradual appreciation and there is a major theme the market is playing, which is for the year-end fixing to be a lot lower than the current level,” said Leo Chan, head of regional foreign-exchange and interest-rate trading in Hong Kong at ABN Amro Bank NV. “If China does recover in a big way, and we are seeing some evidence of that, we do expect a conservative 3 percent appreciation next year.”

Twelve-month non-deliverable forwards gained 0.02 percent to 6.3145 per dollar in Hong Kong, according to data compiled by Bloomberg, halting a two-day decline. The central bank set its reference rate at 6.2922 versus a three-week low of 6.2930 on Dec. 7. In offshore market, the yuan spot rate was little changed at 6.2098 per dollar.

In Shanghai, the currency traded at 6.2293 per dollar, the upper limit of its 1 percent trading band, for most of the day before closing 0.24 percent weaker at 6.2451, according to China Foreign Exchange Trade System.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 1.6 percent, according to data compiled by Bloomberg.

The nation’s exports grew 2.9 percent last month from a year earlier, short of the 9 percent median estimate in a Bloomberg survey and the 11.6 percent gain in October.

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