Yuan Snaps Four-Day Decline on Stronger Fixing, Growth Momentum

China’s yuan rose for the first time in five days after the central bank set a stronger reference rate and economists predicted faster growth in factory output.

The currency headed for a monthly gain as the People’s Bank of China strengthened the yuan’s daily fixing for the first time since Jan. 23 and the local stock market entered a bull run. Manufacturing in the world’s second-largest economy grew in January at the fastest pace since April, a Bloomberg News survey showed before a government report due in two days.

“There’s definitely a slow recovery going on there, and they have been rather cautious about over-stimulating the economy,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “The yuan fixing has been stable, a sign that China is not in a hurry to appreciate its currency.”

The yuan gained 0.06 percent to 6.2204 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It has appreciated 0.16 percent this month, and touched a 19-year high of 6.2124 on Jan. 14. The PBOC set its central parity 0.07 percent stronger at 6.2806 today.

Twelve-month non-deliverable forwards gained 0.16 percent to 6.3055 in Hong Kong, a 1.4 percent discount to the onshore rate, according to data compiled by Bloomberg. The exchange rate rose 0.13 percent to 6.2145 in Hong Kong.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 1.35 percent, according to data compiled by Bloomberg.

Bull Run

The Shanghai Composite Index of stocks rose for a third day, extending a bull run as the gauge capped a 20 percent rally from a Dec. 3 low.

The Purchasing Managers’ Index tracking China’s manufacturing rose to 51 in January versus 50.6 in December, according to the median forecast in a Bloomberg News survey of 32 economists. The National Bureau of Statistics and China Federation of Logistics and Purchasing will report on Feb. 1.

China’s economy expanded 7.9 percent last quarter, reversing seven quarters of slowdown, government data showed Jan. 18. Economists forecast annual growth will quicken to 8.1 percent in 2013, according to a Bloomberg survey published on Jan. 24.

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