Yuan forwards rebounded from a 15-week low as the central bank strengthened the daily fixing for the first time in a week amid a cash crunch in the nation’s financial system.
The People’s Bank of China raised the reference rate 0.06 percent to 6.1767 per dollar, ending a five-day streak in which it weakened the fixing by 0.34 percent. Benchmark money-market rates extended their retreat from record highs, while remaining higher than monthly averages. Goldman Sachs Group Inc. cut its 2013 growth projection to 7.4 percent from 7.8 percent, citing the recent tightening of financial conditions.
“Today is a rebound rather than a change of direction for the yuan,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “Downside pressure remains as onshore liquidity is tight and there’s concern over growth.”
Twelve-month non-deliverable forwards rose 0.14 percent to 6.3065 per dollar as of 10:03 a.m. in Hong Kong, according to data compiled by Bloomberg. The contracts touched 6.3190 per dollar yesterday, the weakest since March 7. They traded at a 2.6 percent discount to the yuan in Shanghai, which was little changed at 6.1446, China Foreign Exchange Trade System prices showed. The onshore spot rate is allowed to diverge from the reference by a maximum of 1 percent.
Long yuan positions will come under stress in coming weeks, Commonwealth Bank of Australia strategists Andy Ji in Singapore and Joseph Capurso in Sydney wrote in a research note yesterday. That’s because of the strength of the dollar, growth concerns stemming from China’s ongoing credit tightening and a possible widening of the daily trading band, the strategists wrote. A long position is a bet a currency or security will rise in value.
In Hong Kong’s offshore market, the yuan slipped 0.02 percent to 6.1415 per dollar, according to data compiled by Bloomberg. One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, declined five basis points, or 0.05 percentage point, to 1.9 percent.
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