The yuan snapped a two-day drop as the central bank raised the currency’s reference rate by the most in a month before Chinese and U.S. officials meet.
The People’s Bank of China strengthened the daily fixing by 0.12 percent to 6.1730 per dollar. Treasury Secretary Jacob J. Lew and Secretary of State John Kerry will meet officials from Beijing including Vice Premier Wang Yang at the U.S.-China Strategic and Economic Dialogue that starts tomorrow in Washington. Federal Reserve Chairman Ben S. Bernanke plans to attend, Obama administration officials said yesterday.
“It’s usual for China to guide the yuan stronger before important meetings with the U.S. to cultivate a better atmosphere,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. “Investors are waiting for more data points to see where the yuan will go next.”
The yuan rose 0.05 percent to 6.1309 per dollar as of 10:10 a.m. in Shanghai, according to China Foreign Exchange Trade System prices. The spot rate was at a 0.7 percent premium to the fixing, compared with the maximum allowed divergence of 1 percent. The yuan has strengthened 1.6 percent this year, the best performance among Asia’s 11 most-traded currencies.
China should “at an appropriate time” take measures including depreciating the yuan periodically and increasing credit support to exporters to stabilize growth of overseas sales, according to a front-page commentary in the China Securities Journal. June export data may not be “optimistic,” according to the article, which cited an unidentified person.
Overseas sales probably rose 3.7 percent in June, a Bloomberg survey showed before data due tomorrow. That compares with a 1 percent increase in May, although still trails last year’s monthly average growth of 8.3 percent. Consumer prices advanced 2.7 percent in June from a year earlier, more than the median estimate of 2.5 percent in a Bloomberg survey and a 2.1 percent gain in May, a report showed today.
“Inflationary pressure in China remains low so it won’t have a big impact on the yuan,” Bank of East Asia’s Lai said.
In Hong Kong’s offshore market, the yuan gained 0.02 percent to 6.1363 per dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards advanced 0.06 percent to 6.2938, at a 2.6 percent discount to the onshore spot rate.
One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, dropped seven basis points, or 0.07 percentage point, to 1.58 percent today, according to data compiled by Bloomberg.
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