By John Liu
April 20 (Bloomberg) -- Yuan forwards fell for a fifth day, the longest losing streak in seven weeks, as a faltering rally in global equities helped shore up support for the dollar.
Premier Wen Jiabao said on April 18 that China must prepare for greater difficulties over a longer period of time even though the stimulus package has shown “better-than-expected” results in reviving economic growth. The People’s Bank of China fixed the reference rate for yuan spot trading weaker for a third day, following five days of gains.
“It seems directly correlated to risk appetite,” said Dwyfor Evans, a strategist at State Street Global Markets in Singapore. “We have seen appreciation pared back in the yuan’s NDFs on a more stable dollar in recent days.”
Twelve-month non-deliverable forwards contracts slid 0.1 percent to 6.7870 per dollar as of 10:25 a.m. in Shanghai, according to data compiled by Bloomberg. In the spot market, the currency traded at 6.8340, little changed from 6.8326 at the end of last week, according to the China Foreign Exchange Trade System. ICE’s Dollar Index, a gauge of strength in the greenback, was headed for its highest close in a month.
China has managed the yuan against a basket of currencies including the euro, the pound and the South Korean won since a dollar peg was scrapped in 2005. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the central parity rate, which was set at 6.8329 today.
Forwards are agreements in which assets are bought and sold at current prices for settlement at a later-specified time and date. Non-deliverable forwards are settled in dollars rather than the underlying asset.
To contact the reporters on this story: John Liu in Shanghai at jliu42@bloomberg.net.
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