Offshore Yuan Halts Two-Day Drop on Trading Extension, Fed Bets

  • China said to double onshore currency's trading hours
  • Decline in PBOC's yuan positions slowed in September

The yuan in Hong Kong halted a two-day drop as China was said to double the onshore currency’s trading hours and after weak U.S. data lowered odds of a Federal Reserve interest-rate increase this year.

China is planning to extend yuan trading to keep the market open during the European day as it pushes for the currency to be included in the International Monetary Fund’s Special Drawing Rights basket, people familiar with the matter said. A gauge of the dollar fell the most in seven weeks Wednesday after U.S. retail sales rose less-than-estimated in September. Futures contracts show a 27 percent chance the Fed will raise rates before the end of the year, compared with 59 percent a month ago.

The freely-traded offshore yuan climbed 0.06 percent to 6.3477 a dollar as of 5:10 p.m. in Hong Kong, data compiled by Bloomberg show. The onshore rate in Shanghai, which is restricted to moves of a maximum 2 percent from a daily fixing set by the central bank, rose 0.03 percent to close at 6.3460, China Foreign Exchange Trade System prices show.

“The market is less worried the Fed will boost interest rates this year,” said Aaron Chan, director of retail sales at ADS Securities Hong Kong Ltd. “It is now highly possible that the yuan will win reserve-currency status as China has made many efforts to make it happen.”

Increased Access

China is allowing global funds increased access to its domestic capital markets and broadening the range of yuan-denominated investments available offshore ahead of the IMF’s November review. A market-based representative yuan rate would be needed for the currency’s inclusion in the SDR basket, the lender said in August.

Yuan trading in Shanghai will close at 11:30 p.m. local time instead of 4:30 p.m., the people familiar with the issue said. The People’s Bank of China’s reference rate for the yuan was little changed from Wednesday at 6.3402 a dollar.

Yuan positions at the PBOC dropped 264.1 billion yuan to 25.8 trillion yuan in September, compared with a record decline of 318.4 billion yuan in August, according to a report Thursday on what the authority calls positions for foreign-exchange purchases. That indicates capital is leaving the economy at a slower pace as yuan depreciation pressures ease, according to Banco Bilbao Vizcaya Argentaria SA.

— With assistance by Tian Chen

Before it's here, it's on the Bloomberg Terminal.