Offshore Yuan Gains on Intervention Bets Before Xi-Obama Summit

Updated on
  • State bank agents seen selling dollars onshore, offshore
  • Presidents set to discuss issues including currency policy

The offshore yuan rose the most in almost two weeks on speculation the central bank is propping up the currency as presidents Xi Jinping and Barack Obama prepare to meet at a formal summit in Washington later Friday.

The People’s Bank of China stepped into both the Shanghai and Hong Kong markets to sell the dollar through agents of state lenders, said two people familiar with the matter. The aim is to keep the currency stable during Xi’s visit to the U.S., one person said. Xi and Obama, who had a private dinner on Thursday, are expected to discuss issues including currency policy and restrictions on U.S. businesses operating in the Asian nation.

The freely-traded yuan in Hong Kong rose 0.47 percent to 6.3999 a dollar as of 5:18 p.m. local time, according to data compiled by Bloomberg. That’s the biggest advance since Sept. 10, when the PBOC was first seen taking the rare step of intervening in the offshore market after an Aug. 11 devaluation. The currency is down 0.2 percent from Sept. 18, the most since the second week of August.

“Market sentiment is being supported this week by speculation that the PBOC will intervene through major agent banks during Xi’s U.S. state visit," said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “Xi may want to portray a benign backdrop that the economy is sound and everything is good.”

Onshore Price

The onshore yuan, which can diverge a maximum 2 percent from the People’s Bank of China reference rate, rose 0.13 percent to close at 6.3744 a dollar, China Foreign Exchange Trade System prices show. It’s down 0.16 percent for the week. The PBOC set its daily fixing at 6.3785 on Friday, little changed from the previous day.

Major Chinese lenders sold the dollar to support the yuan during European and New York trading hours, according to traders in London. The PBOC intervened through state banks in the Shanghai and Hong Kong markets on Wednesday to prop up the yuan, according to a person familiar with the matter. China won’t devalue the yuan to boost exports and there’s no basis for depreciation, Xi said in Seattle earlier this week.

— With assistance by Tian Chen

Before it's here, it's on the Bloomberg Terminal. LEARN MORE