China Money Rate Drops to 1-Week Low as Inflows Seen Rise

China’s money-market rate dropped to the lowest level in more than a week on speculation higher overseas investment will boost cash in the financial system.

Foreign direct investment rose 6.3 percent from a year earlier to $8.21 billion in February, the Ministry of Commerce said in a statement today in Beijing. That’s the first increase in nine months. China’s central bank sold 39 billion yuan ($6.3 billion) of 28-day repurchase agreements today at 2.75 percent, and has refrained from adding capital to the financial system via reverse-repurchase contracts since Feb. 7.

“Foreign inflows into China may be rising,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “Liquidity remains at a pretty ample level.”

The seven-day repurchase rate, which measures interbank funding availability, dropped seven basis points, or 0.07 percentage point, to 2.96 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.945 percent earlier, the lowest level since March 8.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, rose one basis point to 3.28 percent, according to data compiled by Bloomberg.

The yield on the 2.91 percent government bonds due April 2015 was steady at 3.08 percent, according to the Interbank Funding Center.

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