Offshore Yuan Rises Most in Two Weeks on Bets PBOC Curbing Drop

  • PBOC may have stepped in after spike in dollar demand: OCBC
  • Currency erases losses while trade-weighted basket rises

The offshore yuan rose the most in two weeks amid speculation China’s central bank intervened to curb market volatility.

The monetary authority may have stepped in after “unusually high” trading volumes suggested rising dollar demand, said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. The dollar-yuan turnover in Shanghai exceeded $30 billion on Monday for the first time since January as the Chinese currency declined.

The offshore yuan in Hong Kong climbed 0.14 percent, the most since June 29, to 6.6962 a dollar as of 5:30 p.m., according to data compiled by Bloomberg. The exchange rate strengthened 0.17 percent to 6.6818 in Shanghai, while a trade-weighted index measuring the yuan against 13 currencies advanced 0.08 percent, the most since June 23. The People’s Bank of China weakened its daily reference rate by 0.16 percent at 6.6950.

“The possibility of PBOC intervention can’t be ruled out,” said Gao Qi, a foreign-exchange strategist at Scotiabank in Singapore. "The level of 6.7 a dollar could be deemed critical by the market and the authorities, and I expect it to be a resistance level in the near future."

Forecasts Cuts

Bank of America Corp., UBS Group AG, Goldman Sachs Group Inc. and the Royal Bank of Scotland Plc last week cut their outlooks for China’s currency, joining early bears such as Rabobank Groep. The onshore yuan has slid 1.5 percent since Britain’s June 23 vote to quit the European Union as the central bank allowed the currency to weaken against the greenback amid slides in the pound and euro.

"The PBOC probably doesn’t want to let the yuan breach the round-number level, like 6.7 a dollar, very easily because that could hurt sentiment and lead to concern that the currency would decline quickly," said Xia Le, chief economist for Asia at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. "The yuan will continue to decline on capital outflow pressures, but this process will be more of a controlled and mild move."

— With assistance by Tian Chen, and Jimmy Zhu

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