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China Money Rate Drops on Speculation Yuan Gains to Draw Capital

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April 3 (Bloomberg) -- China’s benchmark money-market rate dropped the most in a week on speculation capital inflows will increase as yuan appreciation quickens, boosting cash in the financial system.

The People’s Bank of China didn’t gauge demand today for repurchase contracts because a weekly auction held on Thursdays will be canceled this week due to a holiday, according to a trader required to bid at the sales. The yuan jumped the most since December yesterday, strengthening beyond 6.20 per dollar for the first time in 19 years.

“The outlook for faster yuan appreciation is attracting a lot of foreign capital,” said Liu Dongliang, a senior analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “Liquidity will stay ample in the short term.”

The seven-day repurchase rate, which measures interbank funding availability, dropped 10 basis points to 3.32 percent as of 10:19 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the biggest decline since March 27. China’s financial markets will be shut tomorrow and on April 5 for a holiday.

China’s yuan has risen 0.5 percent this year to 6.2013 per dollar, after appreciating 1.02 percent in 2012.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, was unchanged at 3.26 percent, according to data compiled by Bloomberg.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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

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