Offshore Yuan Rises to Seven-Month High After GDP Tops Estimates

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The yuan traded in Hong Kong rose to the strongest level in seven months after the nation posted forecast-beating economic growth for the third quarter.

The offshore yuan climbed 0.10 percent to 6.1281 per dollar as of 6:26 p.m. local time, according to data compiled by Bloomberg. It advanced to 6.1246 earlier, the strongest level since March 10. In Shanghai’s onshore market, the currency strengthened 0.03 percent to 6.1212, China Foreign Exchange Trade System prices show.

Gross domestic product rose 7.3 percent in the July-September period from a year earlier, the statistics bureau said in Beijing today, compared with the 7.2 percent median forecast in a Bloomberg survey and the 7.5 percent expansion of the previous three months. September industrial production exceeded projections, while fixed-asset investment fell short of estimates.

“The GDP number is slightly more positive compared to expectations,” said Suan Teck Kin, an economist at United Overseas Bank Ltd. In Singapore. “That helped support the offshore yuan against the U.S. dollar.”

Industrial output increased 8 percent in September from a year earlier, compared with the 7.5 percent median estimate and August’s 6.9 percent that was the slowest in more than five years. Fixed-asset investment excluding rural households increased 16.1 percent in the first nine months from a year earlier, the statistics bureau said. That compared with the median estimate of analysts for 16.3 percent growth and the 16.5 percent pace of the January-August period.

Flexibility Call

“People want to see stronger industrial production and a gradual slowing down in fixed-asset growth,” said Ju Wang, a senior currency strategist at HSBC Holdings Plc in Hong Kong. “Too strong fixed-asset growth will be contradictory to China’s drive to lower overcapacity in certain sectors and property investments.”

The central bank should encourage two-way flexibility in the yuan as the currency has been “strong” over the past four or five months, according to a front-page article in the China Securities Journal. The onshore yuan has advanced 1.7 percent against the dollar in the last six months, the most in Asia.

Twelve-month non-deliverable forwards rose 0.14 percent to 6.2415 per dollar in Hong Kong today, trading 1.9 percent weaker than the Shanghai spot rate, according to data compiled by Bloomberg.

One-month implied volatility in the onshore yuan, a measure of expected swings used to price options, dropped six basis points, or 0.06 percentage point, to 1.98 percent. The onshore currency was 0.32 percent stronger than the fixing, which the People’s Bank of China raised by 0.04 percent to 6.1410.

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