Offshore Yuan Rises on Global Payments, Assurances on Economy

  • Currency's share of global transactions climbs to 3-month high
  • China's economy won't face a hard landing: People's Daily

The offshore yuan advanced for the first time in three days as the currency’s share of global payments rose to a three-month high and Chinese official media stressed the nation isn’t headed for a hard landing.

China has adequate tools to use if growth slips out of a reasonable range, according to a People’s Daily commentary that described Asia’s largest economy as a "tall, rich and handsome" man in comparison with the rest of the world. Companies can only buy overseas currencies a maximum five days before they make actual payments for goods, having previously been free to make their own decisions on timing, people familiar with the matter said Thursday, citing the State Administration of Foreign Exchange’s instructions to lenders in some regions.

"The use of the yuan will increase in the long term as China seeks to promote the currency’s global use," said Irene Cheung, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. While the recent capital controls create uncertainty, the “measures will be temporary, as China’s ambition to internationalize the yuan won’t change," she said.

The yuan traded in Hong Kong strengthened 0.05 percent to 6.6142 a dollar as of 3:58 p.m. in London, halting a two-day decline, data compiled by Bloomberg show. The onshore exchange rate gained 0.04 percent to 6.5754, according to China Foreign Exchange Trade System prices. The People’s Bank of China set its daily fixing in Shanghai little changed at 6.5528.

Global Payments

The yuan’s share of global payments climbed to 2.31 percent in December from 2.28 percent a month earlier, the Society for Worldwide Interbank Financial Telecommunications reported Thursday.

China is increasingly resorting to administrative measures to quell capital outflows and calls are mounting for further restrictions as the defense of the yuan erodes foreign-exchange reserves.

The central bank told some onshore lenders to stop offering cross-border financing to offshore counterparts late last year, and some Shanghai banks have recently asked their outlets to closely check whether individuals sent money abroad by breaking up foreign-currency purchases into smaller transactions, according to people familiar with the matter. SAFE on Thursday denied a Wall Street Journal report that said policy makers are seeking to restrict avenues for foreign companies to repatriate earnings made in China.

— With assistance by Tian Chen

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