Swaps Signal Further Rate Increases Boosting Yuan: China Credit

The cost of fixing borrowing costs in China suggests policy makers will raise interest rates at least once more this year as food and fuel costs surge, adding pressure on the yuan to strengthen.

The five-year non-deliverable swap rate jumped 26 basis points in the past three weeks to 4.23 percent, after a report showed a higher-than-forecast inflation rate of 4.9 percent in February. The People’s Bank of China’s latest increase was announced yesterday before an April 15 report that will show consumer prices climbed 5.2 percent in March, according to the median estimate in a Bloomberg News survey of nine economists.