HONG KONG: China's yuan raced to its highest in more than three months on Thursday after solid manufacturing activity confirmed the government's stimulus measures were filtering through the economy and brightening growth prospects in the near term.
China's factory activity expanded at its fastest pace in 18 months in July as new orders surged, a preliminary HSBC survey showed, the latest indication that the economy is picking up steam after second quarter GDP numbers last week indicated the economy may have turned a corner.
Spot yuan was changing hands at 6.1914 per dollar in morning trade, up 0.1 percent from Wednesday's close of 6.1983 and hitting its highest level since April 9, according to Thomson Reuters data.
Set against the backdrop of a broadly cautious Asian currency bloc this week, the yuan's rise signals markets are expecting a better performance from the Chinese currency in the coming months compared with earlier this year.
The yuan has lost 2.3 percent against the dollar since the start of the year, the worst performing currency among its emerging market peers.
The pick-up in some high frequency data such as private manufacturing surveys and trade have prompted some economists to revise their full-year growth numbers for China.
Bank of America Merrill Lynch became the latest to jump the bandwagon with its economists raising full-year growth targets to 7.4 percent from 7.2 percent previously on expectations that "Beijing will most likely maintain the intensity of its ongoing mini-stimulus program in the second half."
Helping the yuan has been the steadily rising trend in the interbank markets, which are boosting carry-trade strategies.
The benchmark seven-day repo rate has risen to 4.3 percent on Thursday compared with 3.7 percent last Friday.
Higher rates have also enhanced the appeal of the offshore yuan traded in Hong Kong where the currency is also trading at an April high.
Comments
Comments are closed for this article.