Offshore Yuan Has Best Week Since October on Market Opening Bet

  • Opening measures bring long-term benefits, says Bocom analyst
  • Onshore yuan set for longest rising streak since October

The offshore yuan posted the biggest weekly gain in two months on speculation demand for the currency will increase after Chinese authorities announced they would expand trading hours in the mainland and move to liberalize the capital account.

The Chinese currency rose 0.08 percent to 6.5404 a dollar as of 4:36 p.m. in Hong Kong, according to data compiled by Bloomberg. For the week, the yuan is up 0.25 percent, the most since the period ended Oct. 30. The Shanghai rate was little changed Friday at 6.4763 for a 0.08 percent weekly gain, China Foreign Exchange Trade System prices show. The People’s Bank of China raised its daily reference rate, which restricts onshore moves to a maximum 2 percent on either side, by 0.06 percent to 6.4713 on Friday.

From Jan. 4, trading in Shanghai will end at 11:30 p.m. local time, compared with the current 4:30 p.m. close, the central bank said in a statement on Wednesday. Permitting more foreign institutions to trade in the onshore foreign-exchange market will help narrow the gap between the yuan’s rates at home and abroad, it said. China will push forward with yuan convertibility under the capital account, while preventing cross-border flow risks, the State Administration of Foreign Exchange said in a statement on Tuesday.

“All these measures to promote capital account convertibility will bring long-term benefits to China’s economy, even though they could bring more volatility and risks in the short-term,” said Chen Ji, a Shanghai-based senior researcher at Bank of Communications Co. “The yuan may be range bound in the next week as the news front is expected to remain quiet during the Christmas and New Year holidays.”

Chinese leaders pledged to roll out further measures to support the economy in the annual Central Economic Work Conference. Monetary policy must be more flexible and fiscal policy more forceful as the nation creates “appropriate monetary conditions for structural reforms,” according to statements released after the meeting on Monday.

— With assistance by Tian Chen, and Helen Sun

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