Market
Conference
Dollar/yuan NDFs rise, focus turns to China's economy
作者：25 发布时间：2010-06-02 文字大小：【大】【中】【小】
Dollar/yuan offshore forwards edged up nearly across the curve on Tuesday, implying less future yuan appreciation as investors turned their focus to the health of China's economy for hints of where the yuan will head next.
Speculators in non-deliverable forwards (NDFs), who racked up losses in May after frantic bets on a one-off yuan revaluation against the dollar, now confront another scenario -- a possible slowdown of China's economic recovery that may delay its currency policy reform, paving the way for yuan appreciation.
Chinese Premier Wen Jiabao said on Monday that China's growth remained intact but warned of risks to the global economy from the sovereign debt crisis. From past experience, one of the key targets for China in allowing yuan appreciation is its battle on inflation.
If the recovery slows, with less danger of an economic overheating or rising inflation, Beijing may feel less obliged to re-start the reform. The first signs amid shifting investor focus is not encouraging: China's factories scaled back production last month and slowed the pace of hiring as gradual policy tightening took a toll on new orders, a pair of surveys showed.
The official purchasing managers' index (PMI) compiled by the China Federation of Logistics and Purchasing (CFLP) fell to 53.9 in May from 55.7 in April. And HSBC's China PMI dropped in May to an 11-month low of 52.7 from a downwardly revised 55.2 in April as output, new orders and employment all slowed.
Premier Wen told Japanese business executives on Monday that global economic growth remained vulnerable to sovereign debt risks and the possibility of a second downturn, although he said his own nation's growth remained on track.
"The market is nervous as China is more likely to stick to its yuan/dollar peg if its economic recovery slows," said a dealer at a major European bank in Shanghai. "However, a longer-term prospect for the yuan to appreciate is still indisputable as China's economy will anyway outperform major global counterparts by far."
Still, dealers said covering of short dollar positions in yuan NDFs in May -- part of global risk reduction sparked by the euro zone debt crisis -- had helped the market release risks. The middle of the NDF curve, or contracts from nine months to three years, now look attractive because they have lagged in implying the extent of yuan appreciation that China can actually permit unless there is an unexpected dive in China's growth.
Benchmark one-year dollar/yuan NDFs were quoted at 6.7500 bid at midday, up from Monday's close of 6.7410, with implied 12-month yuan rise dropping to 1.15 percent from 1.29 percent, as measured from the Chinese central bank's mid-point. The implied yuan appreciation compared with an around 3 percent rise in a year expected by many dealers trading on the Chinese market, the China Foreign Exchange Trade System. Two-year NDFs edged higher to 6.6250 bid versus 6.6130 at Monday's close, implying a 24-month yuan rise of 3.06 percent, down from Monday's 3.25 percent.
"NDFs are likely to move in a range given that China is expected to remain cautious about policy moves," a trader at a European bank in Shanghai said. Spot yuan was nearly flat at 6.8282 against the dollar at midday from Monday's close of 6.8279 after the Chinese central bank set the daily mid-point little changed at 6.8279 versus Monday's 6.8280
Sourced from www.indiatimes.com
Speculators in non-deliverable forwards (NDFs), who racked up losses in May after frantic bets on a one-off yuan revaluation against the dollar, now confront another scenario -- a possible slowdown of China's economic recovery that may delay its currency policy reform, paving the way for yuan appreciation.
Chinese Premier Wen Jiabao said on Monday that China's growth remained intact but warned of risks to the global economy from the sovereign debt crisis. From past experience, one of the key targets for China in allowing yuan appreciation is its battle on inflation.
If the recovery slows, with less danger of an economic overheating or rising inflation, Beijing may feel less obliged to re-start the reform. The first signs amid shifting investor focus is not encouraging: China's factories scaled back production last month and slowed the pace of hiring as gradual policy tightening took a toll on new orders, a pair of surveys showed.
The official purchasing managers' index (PMI) compiled by the China Federation of Logistics and Purchasing (CFLP) fell to 53.9 in May from 55.7 in April. And HSBC's China PMI dropped in May to an 11-month low of 52.7 from a downwardly revised 55.2 in April as output, new orders and employment all slowed.
Premier Wen told Japanese business executives on Monday that global economic growth remained vulnerable to sovereign debt risks and the possibility of a second downturn, although he said his own nation's growth remained on track.
"The market is nervous as China is more likely to stick to its yuan/dollar peg if its economic recovery slows," said a dealer at a major European bank in Shanghai. "However, a longer-term prospect for the yuan to appreciate is still indisputable as China's economy will anyway outperform major global counterparts by far."
Still, dealers said covering of short dollar positions in yuan NDFs in May -- part of global risk reduction sparked by the euro zone debt crisis -- had helped the market release risks. The middle of the NDF curve, or contracts from nine months to three years, now look attractive because they have lagged in implying the extent of yuan appreciation that China can actually permit unless there is an unexpected dive in China's growth.
Benchmark one-year dollar/yuan NDFs were quoted at 6.7500 bid at midday, up from Monday's close of 6.7410, with implied 12-month yuan rise dropping to 1.15 percent from 1.29 percent, as measured from the Chinese central bank's mid-point. The implied yuan appreciation compared with an around 3 percent rise in a year expected by many dealers trading on the Chinese market, the China Foreign Exchange Trade System. Two-year NDFs edged higher to 6.6250 bid versus 6.6130 at Monday's close, implying a 24-month yuan rise of 3.06 percent, down from Monday's 3.25 percent.
"NDFs are likely to move in a range given that China is expected to remain cautious about policy moves," a trader at a European bank in Shanghai said. Spot yuan was nearly flat at 6.8282 against the dollar at midday from Monday's close of 6.8279 after the Chinese central bank set the daily mid-point little changed at 6.8279 versus Monday's 6.8280
Sourced from www.indiatimes.com
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