Yuan Forwards Gain the Most in a Year as Exports Beat Estimates

Yuan forwards strengthened by the most in a year as export growth exceeded estimates and analysts forecast appreciation will accelerate in 2013, bolstering demand for assets denominated in the currency.

Overseas sales rose 14.1 percent from a year earlier in December, official data showed today, compared with a 2.9 percent increase in November and the median estimate of a 5 percent gain in a Bloomberg survey. The most-accurate forecasters for the yuan predict the currency will advance 2 percent in 2013, doubling last year’s advance as China seeks to encourage consumer spending.

“A recovery in exports is positive for China’s economy and hence the yuan,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “A stronger currency will help China to tame inflationary pressure, which is building up. The sentiment on Chinese assets is more bullish now.”

Twelve-month non-deliverable forwards climbed 0.41 percent, the most since Jan. 18, 2012, to 6.2740 per dollar, as of 4:41 p.m. in Hong Kong, according to data compiled by Bloomberg. The contracts gained as much as 0.52 percent to 6.2665 earlier, the strongest level since Feb. 10, 2012. They are at a 0.8 percent discount to the onshore spot rate.

The yuan rose 0.03 percent to close at 6.2244 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.2216 yesterday, the highest level since the government unified the official and market exchange rates at the end of 1993. In Hong Kong’s offshore market, the currency gained 0.17 percent to 6.1918 per dollar. It reached 6.1895 today, the strongest since trading started in 2010.

Inflation Estimate

The People’s Bank of China raised the reference rate by 0.03 percent to 6.2793 per dollar, the strongest since May 2012. The currency is allowed to trade as much as 1 percent on either side of the daily fixing.

Inflation quickened to 2.3 percent last month from 2 percent in November, according to the median estimate of 43 economists before data due tomorrow.

One-month implied volatility in the yuan, a measure of expected moves in exchange rates used to price options, increased 15 basis points, or 0.15 percentage point, to 1.65 percent, according to data compiled by Bloomberg. That’s the biggest jump since Dec. 13.

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