Yuan Rises to Two-Month High as Reserves Show Outflows Slowing

  • Foreign-currency stockpile shrank less than estimated
  • PBOC raises fixing as markets reopen after weeklong holiday

The yuan rose to a two-month high as China’s markets reopened after a week-long break in which the greenback retreated and the nation’s foreign-exchange stockpile was shown to have fallen less than economists forecast.

The central bank raised the yuan’s fixing by 0.17 percent to 6.3505 a dollar, the strongest since the day after its Aug. 11 devaluation. The Bloomberg Dollar Spot Index lost 1 percent Oct. 1-7, during China’s National Day holidays, while data Wednesday showed foreign-currency reserves shrank $43.3 billion in September, less than an estimated $57 billion drop. The hoard fell by a record $93.9 billion in August as the monetary authority sold dollars to prop up the yuan and ease outflow pressures following the devaluation.

"The yuan fixing tracks the dollar weakness over the holiday," said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. "The smaller drop in reserves is positive for the yuan as it shows the central bank’s efforts to stabilize the exchange rate have succeeded. I expect the pace of decline in reserves will slow in the coming months."

The yuan climbed 0.05 percent to close at 6.3537 per dollar in Shanghai, according to China Foreign Exchange Trade System prices. It rose to 6.3496 earlier, the strongest level since the devaluation. In Hong Kong, the currency slipped 0.22 percent to 6.3541, data compiled by Bloomberg show. The offshore rate jumped 0.25 percent on Wednesday as Macquarie Securities Ltd. said the foreign reserves data suggest concerns about capital outflows are overdone.

The nation started the first phase of a cross-border yuan payment system on Thursday. The China International Payment System provides clearing and settlement services and has 19 banks as direct participants. The yuan is "more or less close to the equilibrium level" based on the fundamentals, Reuters reported, citing PBOC Deputy Governor Yi Gang’s comments at an International Monetary Fund meeting in Peru.

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