Yuan Reaches Top End of Band for a Fourth Day as Congress Starts
China’s yuan touched the top end of its permitted trading range for a fourth straight day on optimism a new generation of leaders will take more measures to stimulate growth in the world’s second-largest economy.
President Hu Jintao said today that economic development remains “unbalanced, uncoordinated and unsustainable” as the Communist Party’s 18th Congress started in Beijing, which will entail a once-in-a-decade leadership change. The People’s Bank of China’s yuan fixing was little changed for a third day as $600 billion in tax increases and spending cuts in the U.S. loom and Europe’s economic prospects deteriorate. The U.S. and European Union are the Asian nation’s biggest export markets.
“Investors are hoping the new leadership will act to stabilize growth,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. (23) in Hong Kong. “Yet, the PBOC fixing shows the government’s cautiousness given the U.S. fiscal problems and Europe’s dim outlook.”
The yuan rose 0.01 percent to close at 6.2429 per dollar in Shanghai, according to the China Foreign Exchange Trade System, exceeding the PBOC’s reference rate by the maximum 1 percent allowed. The daily fixing was set 0.01 percent higher at 6.3060 against the greenback.
People’s Bank of China Deputy Governor Yi Gang said today that the economy will be “relatively good” in the fourth quarter. Gross domestic product rose 7.4 percent in the three months through September, the slowest pace since the period ended March 2009.
Vice President Xi Jinping is forecast to replace Hu as general secretary of the 82 million-member party. Vice Premier Li Keqiang is seen taking Premier Wen Jiabao’s spot on the Standing Committee, setting him up to assume Wen’s job next March. The party, founded in 1921, holds its congresses every five years. The new Politburo Standing Committee will be presented after the congress ends Nov. 14 and the new Central Committee holds its first meeting.
In Hong Kong’s offshore market, the yuan slipped 0.02 percent to 6.2355 per dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards fell 0.09 percent to 6.3550, a 1.8 percent discount to the onshore spot rate. One-month implied volatility for the onshore yuan, a measure of exchange-rate swings used to price options, was steady at 1.6 percent.
Former Federal Reserve Chairman Alan Greenspan said in an interview yesterday that China “obviously” has been manipulating the yuan to create jobs. U.S. presidential candidate Mitt Romney, who lost to Barack Obama in elections yesterday, had waged his campaign on the basis he would put pressure on China to address what he called an undervalued currency.
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