China’s yuan recorded the first weekly advance of this month on speculation policy makers prefer a stable currency to bolster global usage and as data showed a surprise surge in investment from overseas.
Foreign direct investment rose 10.5 percent to 59.04 billion yuan ($9.5 billion) in April, the Ministry of Commerce said Friday. That upstages a Bloomberg survey’s projection of a 2 percent increase. The People’s Bank of China, whose officials have called on the International Monetary Fund to name the yuan a reserve currency at a review this year, raised the yuan’s fixing by 0.1 percent this week to the strongest level since February 2014.
The yuan climbed 0.05 percent from May 8 to close at 6.2061 a dollar in Shanghai, according to China Foreign Exchange Trade System prices. The currency slipped 0.08 percent on Friday. The gap between the onshore yuan and the fixing -- which the PBOC raised to 6.1085 -- was 1.6 percent, within the 2 percent daily trading limit.
“A stable or slightly stronger exchange rate is instrumental to boosting yuan usage globally and hence its bid to be a reserve currency,” said Stella Lee, president of Success Wealth Management Ltd. in Hong Kong. “Another factor will be whether the U.S. dollar will regain its strength in the second half of this year.”
The nation should set up yuan-denominated funds for investment overseas and let the currency flow back to China under the current account, central bank researchers led by Yao Yudong wrote in a China Business News article Friday. Joining the IMF’s reserves basket could draw $1 trillion in funds to yuan assets, Aidan Yao, a Hong Kong-based senior emerging-market economist at AXA Investment Managers, said at a press briefing Thursday.
In Hong Kong’s offshore market, the currency fell 0.1 percent Friday to 6.2064 against the greenback, paring this week’s gain to 0.05 percent, according to data compiled by Bloomberg. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell 0.8 percent this week, extending a five-week loss to 4.1 percent.