Feb. 1 (Bloomberg) -- The yuan strengthened for a third day after a government report showed manufacturing unexpectedly expanded last month, signaling China’s economy is withstanding Europe’s debt crisis.
The currency added to yesterday’s biggest gain this year as a purchasing managers’ index rose to 50.5 in January from December’s 50.3, more than the median estimate in a Bloomberg survey for 49.6. A number above 50 indicates expansion. The central bank refrained from cutting banks’ reserve-requirement ratios before last week’s Lunar New Year Holiday, defying economists’ predictions.
“Investor confidence got a boost by better-than-expected PMI,” said Edmond Law, deputy head of foreign currency at BWC Capital Markets in Hong Kong. “Together with the fact that the government hasn’t cut the reserve ratio, it implies China’s economic slowdown isn’t as bad as what people expected.”
The yuan gained 0.03 percent to close at 6.3067 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China raised the daily reference rate by 0.02 percent to 6.3103. The currency is allowed to trade as much as 0.5 percent on either side of the rate.
In Hong Kong’s offshore market, the yuan was little changed at 6.2993, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards slipped 0.04 percent to 6.2833, after rising 1.6 percent in January. The contracts traded at a 0.3 percent premium to the onshore spot rate.
--Editors: Simon Harvey, Ven Ram
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