By BLOOMBERG
The yuan traded in Hong Kong headed for the biggest five-day gain on record as China’s central bank steadied the currency’s fixing and intensified efforts to curb outflows.
The monetary authority kept the reference ratelittle changed for the fourth day in a row. It set the fixing, which restricts onshore moves to a maximum 2 percent on either side, at 6.5630 a dollar, 0.18% stronger than the onshore yuan’s official closing price of 6.5750 on Tuesday.
The offshore yuanrose 0.13% to 6.5752 a dollar as of 10:11 am in Hong Kong, according to prices compiled by Bloomberg. That takes its five-day advance to an unprecedented 2.1%. The currency erased its discount to the onshore rate on Tuesday for the first time since October and was last trading 0.06 percent stronger. The yuan in Shanghai fell 0.06% to 6.5793.
“Measures to prevent sharp yuan depreciation such as intervention and outflow curbs will likely be temporary, but policy makers may want to keep borrowing costs for the currency relatively high in Hong Kong in the near term as it seeks to keep the onshore-offshore gap small,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. “These measures put a temporary stop to and will even reverse China’s efforts of internationalising the yuan, but they are necessary to stabilise the volatile markets.”
Outflow curbs
In the latest in a series of moves to stop the local currency from leaving the mainland, China’s foreign-exchange regulator has verbally instructed some banks to limit outflows and reduce offshore yuan positions and liquidity, according to people with knowledge of the matter. The People’s Bank of China (PBOC) has repeatedly intervened in the offshore market via state banks this week to crack down on speculators, people familiar with the matter said. The intervention has limited the supply of yuan overseas, driving the currency’s interbank rates in Hong Kong to record highs.
A Bloomberg replica of a new yuan index composed of 13 currencies and published by the China Foreign Exchange Trade System rose 0.2% to 100. The official CFETS RMB Index dropped 1.5% in the past month to 99.96 on Jan 8, according to a statement on its website. While China has extended onshore yuan trading hours to 11:30 pm, the central bank continues to view the 4:30 pm price as the closing level.
Trade data
China’s exports unexpectedly rose in December, suggesting that the weakening yuan currency is beginning to boost the nation’s competitiveness. Overseas shipments increased 2.3% in yuan terms from a year earlier, the customs administration said on Wednesday. That compares with a 3.7%drop in November. Imports extended a stretch of declines to 14 months, falling 4 percent in yuan terms, leaving a trade surplus of 382 billion yuan (RM255.18 billion).
Bets against the yuan will fail and calls for a large depreciation are “ridiculous” as policy makers are determined to ensure stability, Han Jun, the deputy director of China’s office of the central leading group for financial and economic affairs, said Monday in New York. Downward pressure on the yuan is expected to ease, Ma Jun, the chief economist at the PBOC’s research bureau, said in comments posted Monday on the central bank’s website.
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