Yuan Advances as China Speeds Up $1 Trillion Project SpendingLilian Karunungan
The yuan advanced, halting a two-day drop, as China is said to be speeding up work on 7 trillion yuan ($1.1 trillion) of infrastructure projects as it tries to bolster an economy estimated to expand the least since 1990.
Premier Li Keqiang’s government approved 300 projects as part of a wider 400-venture, 10 trillion yuan plan to run from late 2014 through 2016, said people familiar with the matter who asked not to be identified as the decision isn’t public. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major counterparts, fell 0.2 percent, after rising 1.1 percent in the past two trading days. The gauge reached the highest level yesterday since its inception in December 2004.
The yuan advanced 0.11 percent to 6.2130 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency weakened 0.26 percent yesterday and 0.03 percent on Dec. 31 before markets shut till this week.
“There’s been speculation in the market about the probability of more stimulus in the Chinese economy,” said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. “The latest talk about infrastructure spending is seen in the light of authorities looking at ways to try to stimulate the economy.”
China’s Purchasing Managers’ Index for services compiled by HSBC Holdings Plc and Markit Economics rose to 53.4 last month from 53 in November, according to data released today. Fifty is the dividing line between expansion and contraction. The economy grew 7.4 percent in 2014, according to the median estimate in a Bloomberg survey.
The People’s Bank of China cut the yuan’s reference rate by 0.01 percent to 6.1256 a dollar. The onshore spot price traded 1.4 percent weaker than the fixing, within the 2 percent daily limit. In offshore trading in Hong Kong, the yuan advanced 0.16 percent to 6.2164, data compiled by Bloomberg show. Twelve-month non-deliverable forwards rose 0.21 percent to 6.3195, 1.7 percent weaker than the spot rate in Shanghai.