jueves, 26 de marzo de 2015

jueves, marzo 26, 2015

Beijing Helps to Drive Yuan Higher Against U.S. Dollar

Sudden gains have taken traders by surprise after four months of losses

By Shen Hong

Updated March 20, 2015 5:50 a.m. ET

The Chinese yuan has gained 1.3% against the U.S. dollar since the beginning of the week. Photo: Zuma Press


SHANGHAI—China’s yuan scored its best week in over seven years, as Beijing steps in to the markets to drive the currency higher and kick out speculators betting on losses as the economy deteriorates.

The yuan gained 0.9% against the U.S. dollar since Monday, with the currency touching a three-month high Friday before slipping back to end at 6.2062 per dollar. The central bank has been setting a morning reference rate higher most days while traders say Chinese state banks are also buying the currency to shore up its value.

The sudden gains have taken traders by surprise after four months of losses, serving as a reminder that Beijing still keeps a firm grip on the tightly-controlled currency and won’t allow heavy losses or one-way speculation. Capital has also been flowing out of China this year as the yuan weakens and worries linger that further currency losses could exacerbate that and destabilize the already fragile financial system.

“It’s pretty clear that the central bank doesn’t want the market to build up one-way expectations for the yuan and it wants to generate more two-way fluctuations,” said Chaoping Zhu, economist at UOB Kay Hian Holdings. “At a time like this, if there are excessive expectations for yuan depreciation, it may lead to further capital outflows.”

The surprise intervention is a reversal from last year when China’s central bank engineered an unexpected wave of yuan depreciation, forcing an unwinding of billions of dollars in highly leveraged bets on the currency’s appreciation. Back then, Beijing was also concerned that overseas cash was flooding its economy with excess funds and contributing to asset appreciation, such as in property prices.

“It’s a sort of déjà vu. The only difference is that the PBOC is buying the yuan this time,” said the head of currency trading at a Chinese bank in Shanghai.

This time around, with the dollar surging in global markets and the U.S. Federal Reserve poised to tighten monetary policy, Beijing’s decision to cut interest rates twice since November to help juice up growth has made its currency even less appealing to investors seeking higher returns.

The yuan’s gains this week though signal China may not be eager to be part of a trend where central banks around the world are taking moves to weaken their currencies to help boost exports. Severe devaluation would hurt China’s goal of rebalancing the economy away from relying on exporters and more toward domestic consumption, while Beijing is also trying to have the yuan used more broadly abroad.

“Chinese authorities have already been intervening [in] the currency since early March,” said Eddie Cheung,Standard Chartered’s Asia currency strategist in Hong Kong. “We believe the PBOC aims to dampen hot money outflows and prevent much excessive expectation of one-sided depreciation of the currency.”

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