Yuan Posts Biggest Weekly Advance Since 2012 on Trade Surplus

China’s yuan posted the biggest weekly gain since February 2012 as the nation’s exports unexpectedly increased and the trade surplus widened.

The country has the confidence and the capability to achieve 7.5 percent economic growth this year, Premier Li Keqiang said in a speech in Nigeria yesterday. Overseas shipments rose 0.9 percent in April from a year earlier, data showed yesterday, compared with a 3 percent drop predicted in a Bloomberg survey of analysts and a 6.6 percent decline in March. The trade surplus widened to $18.5 billion, from $7.7 billion.

“The wider surplus and recovery in exports are easing depreciation pressure on the yuan,” said Banny Lam, Hong Kong-based co-head of research at Agricultural Bank of China International Securities Ltd. “China’s economy is expected to grow at a faster pace in the second half of this year on improving external demand.”

The yuan strengthened 0.5 percent this week and was unchanged today at 6.2280 per dollar at the close in Shanghai, China Foreign Exchange Trade System prices show. The People’s Bank of China cut the reference rate by 0.04 percent to a two-week low of 6.1581. The spot rate was 1.1 percent weaker than the fixing, within the 2 percent band allowed.

China’s consumer price index climbed 1.8 percent in April from a year earlier, the slowest pace since October 2012, the National Bureau of Statistics reported today.

In offshore trading in Hong Kong, the yuan fell 0.07 percent today to 6.2315 per dollar, limiting this week’s gain to 0.41 percent which was the biggest since January 2013, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards climbed 0.6 percent this week, the most since January 2013. The contracts dropped 0.1 percent today to 6.2150 and traded 0.23 percent stronger than the spot rate in Shanghai.

One-month implied volatility in the onshore yuan, a gauge of expected moves in the exchange rate used to price options, declined 42 basis points this week, or 0.42 percentage point, to 1.59 percent, data compiled by Bloomberg show. The measure reached 1.58 percent today, the lowest since Feb. 25.

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