Bloomberg News

Yuan Trades Near 12-Week Low as U.S. Data Boosts Dollar Demand

March 15, 2012

The yuan was little changed after reaching a 12-week low yesterday on speculation investors will favor the dollar on signs the U.S. economy is improving.

The People’s Bank of China set its daily fixing 0.05 percent lower at 6.3359 against the greenback. The currency has dropped 0.3 percent since official data on March 9 showed inflation slowed to a 20-month low. Premier Wen Jiabao said in Beijing yesterday the yuan may be near equilibrium and policy makers will allow greater movement in the exchange rate.

“Lower inflation in China plus a stronger dollar points to a fixing which is higher,” in favor of the U.S. currency, said Nick Verdi, a Singapore-based currency strategist at Barclays Capital. “The dollar has been stronger in recent days as markets have reacted to the prospect of further monetary easing in the U.S. being priced out.”

The yuan traded at 6.3300 per dollar at the close in Shanghai, compared with 6.3323 yesterday, according to the China Foreign Exchange Trade System. It touched 6.3471 yesterday, the lowest level since Dec. 21. The currency is allowed to move 0.5 percent either side of the fixing.

In Hong Kong’s offshore market, the yuan was steady at 6.3320. Twelve-month non-deliverable forwards rose 0.12 percent to 6.3344, a 0.07 percent discount to the onshore spot rate, according to data compiled by Bloomberg.

The Dollar Index traded on ICE Futures in New York, which tracks the currency against those of six major trading partners, touched a two-month high.

The Federal Open Market Committee said it expects “moderate economic growth” and predicted the U.S. unemployment rate “will decline gradually.” The Labor Department may say today the number of initial applications by Americans for jobless benefits fell by 5,000 to 357,000 in the week ended March 10, according to economists surveyed by Bloomberg.

One-month implied volatility for the yuan, a measure of exchange-rate swings used to price options, climbed to 2.500 percent, the highest level in two months.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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


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