Markets bet on climbing yuan
Updated: 2009-11-19 16:07:58
Offshore markets bet on hefty yuan gains over the next year even after the Chinese government rebuffed calls for the currency to rise, signaling resistance to change during US President Barack Obama's first visit to China.
Outside pressure has been building on the Chinese authorities to let the yuan rise after more than a year of it being nearly frozen in place against the weakened dollar, with the head of the International Monetary Fund the latest to weigh in.
Obama has promised to raise the issue of the yuan's exchange rate during his talks in Beijing this week, putting the spotlight on a major bone of contention, which has the potential to shake currency markets and diplomatic ties alike.
Twelve-month yuan rise implied by benchmark one-year dollar/yuan non-deliverable forwards (NDFs) remained high at 3.38 percent measured from the Chinese central bank's daily mid-point of 6.8272, though down from 3.76 percent implied at Friday's close.
The one-year NDFs were quoted at 6.6040 bid late on Monday compared with Friday's close of 6.5800.
"With Obama in China this week, the markets are speculating that China may have 'presents' for him. That has caused a little bit of flurry in the yuan options market," said a dealer in Singapore.
Market expectations for yuan appreciation have steadily increased since early September, when investors priced in less than 1 percent gains against the dollar in the next 12 months.
Bets on the yuan's rise propped up other Asian currencies, suggesting authorities in the region would be less worried about their exporters losing out to Chinese rivals.
China's Ministry of Commerce on Monday rejected calls for the yuan to appreciate.
"Either from the perspective of promoting stable global economic development, or from the perspective of promoting a recovery in Chinese exports, we must provide a stable and predictable environment for our enterprises, including macro-economic policy and currency policy," Yao Jian, a ministry spokesman, said on Monday.
Outside pressure has been building on the Chinese authorities to let the yuan rise after more than a year of it being nearly frozen in place against the weakened dollar, with the head of the International Monetary Fund the latest to weigh in.
Obama has promised to raise the issue of the yuan's exchange rate during his talks in Beijing this week, putting the spotlight on a major bone of contention, which has the potential to shake currency markets and diplomatic ties alike.
Twelve-month yuan rise implied by benchmark one-year dollar/yuan non-deliverable forwards (NDFs) remained high at 3.38 percent measured from the Chinese central bank's daily mid-point of 6.8272, though down from 3.76 percent implied at Friday's close.
The one-year NDFs were quoted at 6.6040 bid late on Monday compared with Friday's close of 6.5800.
"With Obama in China this week, the markets are speculating that China may have 'presents' for him. That has caused a little bit of flurry in the yuan options market," said a dealer in Singapore.
Market expectations for yuan appreciation have steadily increased since early September, when investors priced in less than 1 percent gains against the dollar in the next 12 months.
Bets on the yuan's rise propped up other Asian currencies, suggesting authorities in the region would be less worried about their exporters losing out to Chinese rivals.
China's Ministry of Commerce on Monday rejected calls for the yuan to appreciate.
"Either from the perspective of promoting stable global economic development, or from the perspective of promoting a recovery in Chinese exports, we must provide a stable and predictable environment for our enterprises, including macro-economic policy and currency policy," Yao Jian, a ministry spokesman, said on Monday.
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