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Yuan firms vs dollar, eyes economic data
(Reuters)
Updated: 2005-10-20 20:23 China's yuan firmed versus the dollar on Thursday,
rebounding from softness earlier this week as the dollar strengthened globally,
but dealers said the country's strong economic data had yet to make an impact in
the market.
The yuan closed at 8.0905 per dollar, compared with Wednesday's 8.0924.
China's third-quarter economic output expanded a faster-than-expected 9.4
percent from a year earlier, showing little sign of cooling amid strong
industrial output and investment, official data showed.
Dealers said China's continued strong economic growth would add pressure on
the yuan to appreciate in the longer run, but the third-quarter data had no
immediate impact on the currency's trade on Thursday.
"China's economy is now very much propelled by exports. Unless this situation
is changed, fast economic growth will mean a heavy inflow of hard currencies,"
said a Shanghai-based dealer at a foreign bank.
"So the strong third-quarter data means a lot for the long term, though it
had no impact on the yuan's trading today."
But for coming days, or possibly weeks, the yuan is still likely to move
narrowly around 8.0900 as the dollar's strength on global markets would help
offset a strong supply of the U.S. currency at home, dealers said.
Globally, the dollar stabilised on Thursday near a two-year high against the
yen and three-month peak versus the euro hit earlier this week on expectations
for higher U.S. interest rates, but its momentum slackened.
"The yuan managed a bounce today as the dollar's gains are less aggressive,"
said a dealer at a major Chinese bank. "But expectations on the Chinese market
are still that the dollar will continue to rise in the near term."
Dealers said there was growing anticipation that the rises in the U.S.
interest rates might exceed yuan appreciation in the coming one or two years,
and that might help take some pressure for the yuan to appreciate.
On Thursday, six deals between 8 and 365 days were done in onshore forwards,
making it the most active day since the onshore forwards were launched on Aug.
15. A 365-day contract was done at 7.8400 versus the dollar, anticipating that
the yuan would be 3.1 percent stronger in a year's time.
The yuan closed at 9.6784 versus the euro on Thursday, weaker than
Wednesday's 9.6138, and softened to end at 6.9973 per 100 yen, from 6.9844, the
central bank said on its Web site (www.pbc.gov.cn).
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