Yuan Forwards Gain First Time in Five Days on Economic Optimism

Yuan forwards gained for the first time in five days as economists predicted data tomorrow will show China’s economy rebounded from a seven-quarter slowdown.

Economic growth quickened to 7.8 percent in the three months ended Dec. 31, from a three-year low of 7.4 percent in the previous period, according to the median estimate of economists surveyed by Bloomberg News. The nation will open up its financial markets to domestic and foreign firms this year to promote wider use of the yuan globally, China Daily reported, citing Xing Yujing, secretary general of the central bank’s monetary policy committee.

“Economic fundamentals for yuan appreciation are rising,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “As the economy stabilizes, China will be more willing to accelerate yuan internationalization. That’s favorable for offshore yuan assets.”

Twelve-month non-deliverable forwards rose 0.17 percent to 6.2780 per dollar as of 5:02 p.m. in Hong Kong, a 0.99 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The yuan climbed 0.07 percent to 6.1880 versus the greenback in the offshore market.

The yuan closed at 6.2160 per dollar in Shanghai, little changed from yesterday’s 6.2165, according to the China Foreign Exchange Trade System. The People’s Bank of China cut the reference rate by 0.04 percent to 6.2767 per dollar today. The spot is allowed to trade as much as 1 percent on either side of the fixing.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, declined five basis points, or 0.05 percentage point, to 1.45 percent, according to data compiled by Bloomberg.

China’s position in U.S. Treasuries increased $200 million to $1.17 trillion in November, the most in a year, Treasury Department data released yesterday show. The nation is the largest foreign lender to the U.S. government, followed by Japan.

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