Yuan slightly up

The yuan reversed earlier losses on Tuesday to end slightly higher as the market brushed off China's disappointing exports and as the US dollar index fell 0.60 percent in early European trade. Spot yuan finished at 6.8216 versus the dollar from Monday's close of 6.8230 after it initially hit an intraday low of 6.8256.
The central bank set the yuan's daily mid-point, or its reference rate at 6.8242 from Monday's 6.8220. Federal Reserve Chairman Ben Bernanke's comments that the dollar will retain its role as the world's reserve currency and strong US economic growth will ensure the dollar's exchange rate value, had kept the yuan restrained.
A steeper-than-expected fall in exports also exerted pressure on the currency, overshadowing strength in capital spending data and casting fresh doubt on just how solid the prospects for recovery are in the world's third-largest economy.
Exports in April were down 22.6 percent from a year earlier, the government said on Tuesday. That was steeper than March's 17.1 percent decline and greater than the 18 percent drop that economists had expected. After adjusting for the numbers of working days, however, the customs office said China exported 6.9 percent more in April than in March.
"Although these numbers might seem a little disappointing on the surface, I wouldn't interpret them as suggesting that hopes for an ongoing recovery in China have been in any material way set back," said Saul Eslake, chief economist at ANZ bank in Melbourne. "The recovery is being driven primarily by domestic demand and policy measures that have driven domestic demand."
Indeed, China's urban fixed-asset investment rose 30.5 percent in the first four months of 2009 from a year earlier, compared with a 28.6 percent increase in the first quarter, the National Bureau of Statistics said on Tuesday. That was better than the median forecast of economists polled by Reuters for a rise of 29.1 percent. The statistics agency did not issue a figure for April alone.
Citing a general trend of improving Chinese economic data, Ben Simpfendorfer, economist at Royal Bank of Scotland, raised his forecast for China's gross domestic product growth in 2009 to 7 percent from 5 percent.