Year's Worst-Hit Currencies Recover as Risk From China Wanes

  • Rand, Aussie rebound, are among day's biggest gainers
  • IG sees `pickup in risk appetite' as China steadies yuan fix

South Africa’s rand and Australia’s dollar advanced as China kept its yuan reference rate stable for a fourth day, giving investors the confidence to buy back some of this year’s worst-hit currencies.

The yen dropped against 27 its 31 major peers as China stepped up efforts to prevent a sharp depreciation of its currency. Data Wednesday showed Chinese exports exceeded economists’ forecasts, suggesting the weaker yuan may be boosting the competitiveness of the world’s biggest trading nation.

“A combination of the recent stabilization in the renminbi, better trade data from China and relief that oil hasn’t continued its slide help to reduce risk aversion, at least temporarily,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “This benefits some commodity currencies. That said, investor sentiment remains fragile.”

The rand strengthened 1.1 percent to 16.4885 per dollar as of 7:33 a.m. New York time, while Australia’s dollar rose 0.5 percent to 70.22 U.S. cents.

The yen, regarded as a haven because of Japan’s current-account surplus, weakened 0.4 percent to 118.15 per dollar, while the euro fell 0.5 percent to $1.0808.

Commodity Currencies

The currencies of nations that depend on commodity exports were hammered in the opening days of the year as an eight-day run of reductions in the yuan’s reference rate spooked financial markets. The Bloomberg Commodity Index has slumped almost 5 percent since Dec. 31, while oil hovered around a 12-year low of about $31 a barrel.

The rand is still down 6.2 percent this year, making it the worst performer among major currencies versus the dollar. The dollars of Australia, New Zealand and Canada have all fallen more than 2 percent, the most among their Group-of-10 peers.

The People’s Bank of China kept the yuan reference rate, which restricts onshore moves to a maximum 2 percent on either side, little changed at 6.5630 per dollar on Wednesday. The currency traded in Hong Kong climbed as officials tried to curb bets on a rapid depreciation and close the gap between onshore and offshore rates.

“The yuan fix underscores the ‘stability’ over ‘liberalization’ policy imperatives, and has pulled the yen lower and the likes of the Aussie higher,” said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney. “China aside, the overwhelming influence on markets globally is the unrelenting slide in oil prices. For the time being, the yen should stay pretty well bid, and commodity currencies under the pump.”

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