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Yuan Approaches 19-Year High After Central Bank Boosts Fixing

Jan. 23 (Bloomberg) -- China’s yuan rose to within 0.1 percent of a 19-year high after the central bank raised its daily fixing for the currency for the first time this week.

The People’s Bank of China boosted the yuan’s reference rate by 0.05 percent to 6.2762 per dollar. The currency is allowed to trade as much as 1 percent on either side of the fixing. The stronger guidance for the currency was prompted by the yen’s gains against the dollar after the Bank of Japan deferred new monetary stimulus, according to Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd.

“We expect the yuan to continue to trade at the strong side of the trading band,” Singapore-based Goh said. “The PBOC will probably continue to try and maintain a stable fix. There’s no doubt the Chinese economy is improving.”

The yuan advanced 0.03 percent to 6.2180 per dollar in Shanghai, a 0.9 percent premium to the reference rate, according to China Foreign Exchange Trade System data. The currency reached 6.2124 on Jan. 14, the strongest level since the government unified official and market exchange rates at the end of 1993.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 1.30 percent, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan fell 0.1 percent to 6.2048 per dollar.

Twelve-month non-deliverable forwards declined 0.06 percent to 6.2835 per dollar in Hong Kong, a 1 percent discount to the onshore spot rate, according to data compiled by Bloomberg.

China’s gross domestic product increased 7.9 percent in the fourth quarter from a year earlier, after a 7.4 percent gain in the previous three months, the government reported last week.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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