Yuan Rises Most Since 2012 on Speculation Volatility Aim Reached

China’s yuan climbed the most since 2012 on speculation the central bank has achieved its goal of discouraging one-way bets on the currency after spurring last month’s record decline.

The yuan strengthened 0.27 percent this week after slumping 1.3 percent in February amid speculation the People’s Bank of China wants an end to the currency’s steady appreciation before a possible widening of the trading band. Deputy Governor Pan Gongsheng said today a more flexible, market-based exchange rate is a key step to reforms.

The yuan has stabilized as selling in the currency has slowed, said Andy Ji, a foreign-exchange strategist in Singapore at Commonwealth Bank of Australia. “If the PBOC’s objective was to correct the market expectations of yuan appreciation, they’ve achieved that.”

The yuan climbed 0.24 percent today to 6.1282 per dollar in Shanghai, according to China Foreign Exchange Trade System prices. That’s the biggest gain since Dec. 13, 2012. The spot rate was 0.04 percent weaker than the fixing, which was lowered 0.03 percent today to 6.1257, the weakest level since Dec. 5. The currency is allowed to diverge a maximum 1 percent from the reference rate.

In Hong Kong’s offshore market, the yuan reversed earlier losses to strengthen 0.07 percent to 6.1239 per dollar, data compiled by Bloomberg show. It earlier slid to 6.1383, the weakest level since July 30.

Growth Target

China’s economic-growth target for the year is 7.5 percent, Premier Li Keqiang said at the annual meeting of the legislature in Beijing today. That’s unchanged from last year’s goal, which was exceeded as gross domestic product increased 7.7 percent. The yuan appreciated today as the expansion target exceeded some investors’ expectations, according to Irene Cheung, Singapore-based currency strategist at Australia & New Zealand Banking Group Ltd.

Twelve-month non-deliverable forwards fell 0.04 percent to 6.1632 per dollar, trading at a 0.6 percent discount to the Shanghai spot rate. One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 1.86 percent, according to data compiled by Bloomberg.

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