China’s yuan rose for a fourth day after Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases that boost supply of dollars, spurring demand for emerging-market currencies.
Bernanke said yesterday the Fed’s bond buying is supporting U.S. expansion with little risk of inflation or asset-price bubbles. The People’s Bank of China raised the yuan’s reference rate for a second day, strengthening it by 0.02 percent to 6.2842 per dollar. China may add 100 billion yuan ($16 billion) of Renminbi Qualified Foreign Institutional Investor quotas for Taiwan investors, Xinhua News Agency reported yesterday.
“Bernanke’s comments eased concerns of an early exit of quantitative easing, which is supporting the yuan,” said Daniel Chan, a Hong Kong-based executive vice president at Glory Sky Global Markets Ltd. “The PBOC may intend to keep the exchange rate a bit stronger as it seeks to boost demand among foreign investors.”
The currency climbed 0.04 percent to 6.2273 per dollar in Shanghai, prices from the China Foreign Exchange Trade System show. It touched 6.2262 earlier, the strongest level since Feb. 4.
In Hong Kong’s offshore market, the yuan gained 0.08 percent to 6.2244 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards rose 0.06 percent to 6.3220, a 1.5 percent discount to the onshore spot rate.
Taiwan started interbank trading in yuan on Feb. 6 and Chiantrust Commercial Bank, a unit of Taiwan’s fourth-biggest lender by market value, sold 1 billion yuan of three-year notes at 2.9 percent on Feb. 25. The debut yuan sale followed an August pact on cross-strait currency clearing with China’s central bank, which allowed the island’s lenders to offer yuan deposits onshore from this month.
One-month implied volatility in the yuan, a measure of expected moves in the exchange rate used to price options, was little changed at 1.29 percent, according to data compiled by Bloomberg.