China’s yuan climbed toward a 19-year high on speculation the nation’s new leaders will introduce financial reforms that support growth and attract funds to the world’s second-largest economy.
The People’s Bank of China raised the daily reference rate by 0.11 percent, the most in eight weeks, to 6.2804 per dollar. The economy has the potential to grow 8 percent annually over the next 20 years should the nation reduce support for state companies and unshackle banks, Lin Yifu, a former World Bank chief economist, said yesterday in New York. Incoming President Xi Jinping, due to start his 10-year term in March, has vowed to carry out reforms in the financial markets.
This year “will be all about confidence in the management of economic policy and economic transition insofar as the renminbi is concerned,” said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank. “A smooth transition would serve to bolster both confidence and investment flows.”
The yuan advanced 0.09 percent to 6.2241 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.2223 on Nov. 27, the strongest level since China unified official and market exchange rates at the end of 1993. The currency can trade as much as 1 percent on either side of the PBOC’s daily fixing.
A report last week showed China’s services industries expanded at the fastest pace in four months. The gauge was 56.1 last month versus 55.6 in November, official data showed. A reading above 50 indicates expansion. Manufacturing grew for a third month, a separate report showed on Jan. 1.
Twelve-month non-deliverable forwards strengthened 0.12 percent to 6.3110 per dollar in Hong Kong, a 1.4 percent discount to the spot rate in Shanghai, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan rose 0.07 percent to 6.2075.