China's Currency Just Hit A 19-Year High

yuan renminbi

Photo: (Photo by China Photos/Getty Images)

Oct. 11 (Bloomberg) — China’s yuan rose beyond 6.28 per dollar for the first time in 19 years on speculation policy makers will act to revive economic growth and as the central bank raised the currency’s fixing by the most in seven weeks.The yuan’s reference rate was set 0.09 per cent stronger, the most since Aug. 22, to 6.3391 against the U.S. currency. China asked local authorities to spend more on public transport to ease congestion and reduce pollution, according to a statement posted on the central government’s website yesterday after a State Council meeting presided by Premier Wen Jiabao. The Chinese Communist Party will hold a congress starting Nov. 8, while a once-a-decade leadership transition is also planned.

“Investors hold strong expectations for China to roll out more stimulus measures as political issues have been settled,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “It’s quite surprising to see the yuan rising through key levels as export growth has yet to regain strong momentum.”

The yuan gained 0.07 per cent to 6.2790 per dollar as of 10:23 a.m. in Shanghai, according to the China Foreign Exchange Trade System. It touched 6.2781 earlier, the strongest level since China unified official and market exchange rates at the end of 1993. The spot rate is at a 0.96 per cent premium to the daily fixing, close to the 1 per cent permitted trading range.


China Exports

The Chinese currency has advanced 0.25 per cent against the dollar so far in 2012. That compares with the median estimate of analysts in a Bloomberg survey for a 0.25 per cent decline to 6.31 by year-end.

Spain’s debt rating was cut to one level above junk by Standard & Poor’s yesterday, which cited mounting economic and political risks as the government considers a second bailout. Europe is among the top destinations for Chinese exports.

A report on Oct. 13 may show China’s overseas sales climbed 5.7 per cent from a year earlier in September, compared with a 2.7 per cent increase the previous month, according to the median estimate of economists in a Bloomberg News survey.

In Hong Kong’s offshore market, the yuan climbed 0.09 per cent to 6.2871 per dollar and touched 6.2860, the strongest level since Feb. 9, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards gained 0.08 per cent to 6.3923, a 1.8 per cent discount to the onshore spot rate. One- month implied volatility, a measure of exchange-rate swings used to price options, held at 1.2 per cent.


–Editors: Simon Harvey, Anil Varma


To contact the reporter on this story: Fion Li in Hong Kong at [email protected]


To contact the editor responsible for this story: James Regan at [email protected]

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