Yuan Fixing Set Near Record High as Premier Li Pledges Reforms

The People’s Bank of China raised the yuan’s reference rate to within 0.005 percent of the strongest level on record after Premier Li Keqiang said the nation will continue to push for capital-account convertibility.

The PBOC boosted the daily fixing 0.02 percent to 6.1601 per dollar, just shy of the record 6.1598 on June 17. The spot rate in Shanghai is allowed to trade as much as 1 percent on either side of the fixing. China will keep pushing for interest-rate liberalization and will consider making Switzerland an offshore yuan hub, according to a transcript of Li’s comments posted on the website of the Xinhua News Agency yesterday. Key economic indicators in August have shown recovery, Li said.

The yuan gained 0.02 percent to close at 6.1185 per dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency has advanced 1.8 percent this year, the best performance among Asia’s 11 most-traded exchange rates.

“The yuan is resilient as the sentiment on China has improved based on recent economic data,” said Patrick Cheng, a Hong Kong-based senior investment analyst at Goldenway Group, a foreign-exchange brokerage. “A stable and relatively strong yuan will continue to draw investor interest, helpful for promoting its global usage.”

China should make its currency more widely used in trade and settlement, according to a commentary published in China Securities Journal today.

‘Turning Point’

The nation reported 10.4 percent growth in industrial output for August yesterday, beating the median forecast for a 9.9 percent gain in a Bloomberg survey. Figures released over the weekend showed exports rose the most in four months.

Asia’s largest economy will rebound after the third quarter, which is the “turning point,” Shanghai Securities News reported today, citing Wang Jun, a researcher at the China Center for International Economic Exchanges.

In Hong Kong’s offshore market, the yuan rose 0.03 percent to 6.1098 per dollar, according to data compiled by Bloomberg, after touching a record high of 6.1063 yesterday. Twelve-month non-deliverable forwards advanced 0.02 percent to 6.2240 in Hong Kong, according to data compiled by Bloomberg. The contracts traded at a 1.7 percent discount to the onshore rate.

One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, climbed four basis points, or 0.04 percentage point, to 1.08 percent.

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