Yuan Trades Near 19-Year High as China Growth Exceeds Estimates

The yuan traded within 0.05 percent of a 19-year high after China’s economic growth topped estimates, quickening for the first time in two years.

Gross domestic product rose 7.9 percent in the three months ended Dec. 31, official data showed today. That compares with a 7.4 percent increase in the previous period and the median estimate for a 7.8 percent gain in a Bloomberg News survey of economists. Asian stocks advanced as a jump in housing starts and a drop in jobless claims in the U.S. added to signs of a recovery in the world’s largest economy, brightening the outlook for Asian exports.

“The data boosted confidence that China’s growth is regaining momentum, which will drive demand for the yuan,” said Stella Lee, president at Success Wealth Management Ltd. in Hong Kong. “A better export outlook will also support the yuan.”

The yuan closed at 6.2154 per dollar in Shanghai, little changed from yesterday’s 6.2160, according to the China Foreign Exchange Trade System. The currency touched 6.2124 per dollar on Jan. 14, the strongest level since the government unified market and official exchange rates at the end of 1993.

Twelve-month non-deliverable forwards were little changed today at 6.2798 per dollar in Hong Kong, a 1 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The contracts were little changed from a week ago. The Chinese currency fell 0.06 percent to 6.1905 versus the greenback in the offshore market.

Reference Rate

The People’s Bank of China raised the reference rate by 0.02 percent to 6.2752 per dollar today. The spot is allowed to trade as much as 1 percent on either side of the fixing.

China’s industrial output rose 10.3 percent in December, the fastest pace since March, compared with the 10.2 percent median forecast in a Bloomberg survey of 44 analysts, according to a report today. Retail sales climbed 15.2 percent from a year earlier, compared with the median analyst estimate of 15.1 percent and a 14.9 percent increase the previous month.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, declined 35 basis points, or 0.35 percentage point, to 1.40 percent this week, according to data compiled by Bloomberg. The gauge was steady today.

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