Bloomberg News

China Yuan Forwards Gain Most in a Week on Europe Plan Progress

October 17, 2011

Oct. 17 (Bloomberg) -- Yuan non-deliverable forwards rose the most in a week as European leaders made progress on a plan to solve the region’s debt crisis, bolstering confidence before a report tomorrow on China’s third-quarter economic growth.

The onshore yuan rate also strengthened as gross domestic product probably increased 9.3 percent from a year earlier, according to the median estimate of 22 economists in a Bloomberg News survey. That would be the ninth straight quarter of expansion above 9 percent and follows a 9.5 percent gain in the previous three months. The People’s Bank of China set the reference rate stronger for the first time in four days.

“NDFs have been boosted by risk appetite as investors hope a solution to the European crisis will be announced soon,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “A firmer fixing confirms that China continues to want its currency to appreciate.”

Twelve-month non-deliverable forwards rose 0.36 percent to 6.3790 per dollar as of 4:31 p.m. in Hong Kong, a 0.13 percent discount to the onshore spot rate, according to data compiled by Bloomberg. The yuan gained 0.12 percent to close at 6.3706 in Shanghai, according to the China Foreign Exchange Trade System. The currency is allowed to fluctuate 0.5 percent on either side of the fixing rate, which was set at 6.3710 today.

Group of 20 finance ministers and central bank officials reached some agreement during weekend talks in Paris on how to avoid a Greek default, bolster banks and curb the contagion. They set an Oct. 23 summit of European leaders in Brussels as the deadline for the final plan to delivered.

In Hong Kong’s offshore market, the yuan advanced 0.25 percent to 6.4260, a 0.9 percent discount to the onshore spot rate.

--Fion Li, Judy Chen. Editors: Simon Harvey, Anil Varma

To contact Bloomberg News staff for this story: Fion Li in Hong Kong at fli59@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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