Yuan, the major currency of China increased for the 9th straight week marking the longest winning streak since last November as many economists feel that the capital inflows will be supporting the currency. The People’s Bank of China has cut the daily fixing by 0.11% to 6.2152 per USD on today after increasing it by 0.2% on yesterday. Apart from that, stocks increased the most in a week on today after the valuations on the benchmark index dropped to a 4-month low figure. Incidentally, on 1st May, the Federal Reserve stated that it is prepared to increase the monthly pace of bond buying over $85 billion for guarding against any sort of slump in the growth of the biggest economy of the country. Incidentally, on the first 3 days of this week, the Chinese markets were closed because of holidays.
According to the President of Success Wealth Management, Stella Lee, Yuan is probably going to stay strong as capital inflows will continue. Yuan advanced by 0.15% on this week to 6.1556 per USD after staying mostly unchanged on today. The data was released by the China Foreign Exchange Trade System. On yesterday, the currency touched 6.1537, marking the strongest level since the Chinese Government decided to unify the official and market exchange rates in 1993. Currently, the spot rate in Shanghai is allowed to diverge a maximum of 1% from the daily fixing. According to the data released on last week, the financial and capital account surplus of China surged in the 1st quarter of 2013.
When it comes to implied volatility on Yuan, it increased by 21 basis points and is currently at 1.64% on the current week. Incidentally, implied volatility denotes the exchange rate swings used for pricing the options. On today, it however went down by 3 basis points. According to the official Purchasing Manager’s Index, growth in the Chinese industries slowed down in April. Further reports were released on this week indicating that manufacturing is losing the momentum too.
According to a Chinese Securities Journal report, the appreciation prospects of Yuan may have been exaggerated and a periodic depreciation can be expected as well. The report cited renowned analysts such as the Head of Chinese Forex Investment Research Institute, Tan Yaling. It also stated that the aggressive management of Yuan reference rate has driven gains in the currency.