Yuan climbs to 2016 high as PBOC raises most in four months

The Pak Banker - - FRONT PAGE -

BEI­JING: The on­shore yuan ad­vanced to the strong­est level since De­cem­ber af­ter China's cen­tral bank raised its daily ref­er­ence rate by the most in four months. The mag­ni­tude of the fix­ing in­crease sur­prised Aus­tralia & New Zealand Bank­ing Group Ltd., with se­nior cur­rency strate­gist Khoon Goh putting it down largely to a euro rally and dol­lar de­cline overnight. The Euro­pean cur­rency jumped the most since Feb. 3 af­ter cen­tral bank Pres­i­dent Mario Draghi said he didn't see any need to cut in­ter­est rates fur­ther, while a gauge of dol­lar strength fell 0.54 per­cent.

The yuan climbed 0.13 per­cent to 6.4993 a dol­lar as of 5:08 p.m. in Shang­hai, ac­cord­ing to China For­eign Ex­change Trade Sys­tem prices. It rose to 6.4866 ear­lier, the strong­est level since Dec. 29. The off­shore rate in Hong Kong gained 0.13 per­cent to 6.4963. The Peo­ple's Bank of China raised its fix­ing, which re­stricts on­shore moves to 2 per­cent on ei­ther side, by 0.34 per­cent to 6.4905.

"The fix­ing and yuan moves re­flect euro strength and dol­lar weak­ness overnight, as well as Chi­nese of­fi­cials' an­tic­i­pa­tion for fur­ther strength in non-dol­lar ma­jor cur­ren­cies," said Christy Tan, head of mar­kets strat­egy at Na­tional Aus­tralia Bank Ltd. in Hong Kong. "The new yuan in­dex con­tin­ued its down­ward drift af­ter fall­ing below 99 in early Fe­bru­ary, and this is in line with the au­thor­i­ties' aim of keep­ing the cur­rency sta­ble but al­low grad­ual weak­ness against the bas­ket."

A Bloomberg replica of the CFETS RMB In­dex, which was un­veiled in De­cem­ber and mea­sures the yuan against 13 cur­ren­cies, was trad­ing within a 99-101 range for nine weeks. It was last at 98.8 on Fri­day. One-month im­plied volatil­ity in the yuan, a mea­sure of ex­pected ex­change-rate swings used to price op­tions, rose nine ba­sis points to 5.32 per­cent, ac­cord­ing to data com­piled by Bloomberg. That's the big­gest in­crease in a week. The govern­ment will re­lease key data on Satur­day and PBOC Gov­er­nor Zhou Xiaochuan and his top deputies will hold an an­nual press con­fer­ence.

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