The yuan strengthened after data showed U.S. factory orders rose for the first time in three months, easing concern that global growth is losing traction.
Orders placed with factories in the world’s largest economy rose 0.7 percent in May, following a revised 0.7 percent drop in April, the Commerce Department said yesterday. The People’s Bank of China raised the yuan’s reference rate by 0.09 percent to 6.3121 per dollar. The European Central Bank will cut its benchmark interest rate tomorrow, according to 51 of 62 forecasts in a Bloomberg survey.
“Investors are expecting better data from the U.S. and China, with global central banks on track with easing measures,” said Tommy Ong, the Hong Kong-based senior vice- president of treasury and markets at DBS Bank (Hong Kong) Ltd. “A brighter global growth outlook is favorable for the Chinese currency. The yuan could resume appreciation later this year.”
The yuan gained 0.07 percent to close at 6.3477 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency is allowed to trade as much as 1 percent on either side of the daily reference rate. One-month implied volatility, a measure of exchange-rate swings used to price options, decreased five basis points, or 0.05 percentage point, to 1.63 percent.
In Hong Kong’s offshore market, the yuan advanced 0.08 percent to 6.3469 per dollar. The offshore rate has strengthened 0.21 percent this week after China’s Ministry of Finance auctioned 17.5 billion yuan ($2.8 billion) of Dim Sum bonds and started selling 5.5 billion yuan of two-year notes to individuals in Hong Kong last week. Twelve-month non-deliverable forwards rose 0.08 percent to 6.4008, a 0.8 percent discount to the onshore spot rate.
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