Offshore markets kept their bets firmly on hefty yuan appreciation against the dollar in the long run amid US President Barack Obama's visit to China on Monday, despite a small technical correction, dealers said. The market ignored Sino-US discord, which surfaced at a summit of the Asia Pacific Economic Co-operation (Apec) forum in Singapore when a reference to "market-oriented exchange rates" was cut from a communique issued at the end of two days of talks.
An Apec delegation official said Washington and Beijing could not agree on the wording. The market also shrugged off comments by China's Commerce Ministry on Monday, which signalled resistance to change in a controversial foreign exchange policy that loomed over Obama's first visit to the Asian giant. "With Obama in China this week, the markets are speculating that China may have 'presents' for him. That has caused a little bit of flurry in the CNY (yuan) options market," said a dealer in Singapore.
Benchmark one-year dollar/yuan volatilities stood at 6.00 percent bid in late trade on Monday after hitting 6.55 percent at Friday's close, which implied their strongest expectations of yuan appreciation since June. Twelve-month yuan appreciation implied by one-year dollar/yuan non-deliverable forwards (NDFs) remained high at 3.35 percent measured from the Chinese central bank's daily mid-point, though that was down from 3.76 percent implied at Friday's close.
The benchmark NDFs were quoted at 6.6062 bid late on Monday compared with Friday's close of 6.5800. The Chinese central bank fixed the yuan's daily mid-point little changed at 6.8272 versus the dollar on Monday, compared with Friday's level of 6.8273, giving no immediate signs of a goodwill gesture to Obama that some dealers had expected.
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