Yuan spikes in offshore trading

BEIJING • The yuan jumped sharply in offshore trading, reversing earlier losses, on suspected intervention by China's central bank.

The currency swung to a 0.3 per cent gain versus the US dollar as of 2.40 pm yesterday, having been 0.13 per cent weaker on the day just three minutes earlier.

The surge came about after the offshore yuan's discount to the onshore spot rate widened to the most this month, thwarting China's goal of having the rates converge.

International Monetary Fund (IMF) managing director Christine Lagarde announced late on Friday that her staff have recommended the Chinese currency be included in the fund's Special Drawing Rights, alongside the US dollar, euro, pound and yen.

The recommendation makes approval by the fund's executive board this month all but certain, as major IMF shareholders have said they will support inclusion if the yuan meets the criteria of the Washington-based institution.

"It should be the PBOC (People's Bank of China) propping up the yuan as it seeks to narrow the gap between the onshore and offshore rates before the IMF takes it final decision in two weeks," said Commonwealth Bank of Australia strategist Andy Ji.

"The PBOC will likely refrain from heavy intervention after the final approval, as economic fundamentals remain weak and that helps to save some foreign-exchange reserves."

The offshore yuan was 0.3 per cent stronger at 6.3909 per US dollar as of 3.36 pm in Hong Kong.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 17, 2015, with the headline 'Yuan spikes in offshore trading'. Print Edition | Subscribe