Yuan rises in NDFs as U.S.-China trade spat heats up
* U.S. sets more duties on China steel pipes
* Trade disputes add pressure on yuan appreciation
* Chinese c.bank seems not ready to change yuan policy
* Yuan peg unsustainable in long run, academic says
By Chen Yixin and Jacqueline Wong
SHANGHAI, Nov 6 - The yuan rose slightly against the dollar in benchmark offshore non-deliverable forwards on Friday, buoyed by news that the United States slapped preliminary anti-dumping duties on Chinese-made oil well pipes in the biggest U.S. trade action against China. [ID:nN05129831]
The duties, which ranged up to 99 percent on Chinese-made oil well pipes and comes a week before U.S. President Barack Obama heads to Asia on a trip that includes stops in Shanghai and Beijing, signalled that the United States was stepping up pressure on China to make concessions on trade, dealers said.
In U.S.-China trade disputes, the yuan has consistently been a focus as U.S. critics say China intentionally keeps its currency undervalued to gain advantages, while China has voiced displeasure over U.S. restrictions on exports of high-technology products to China and on other matters.
"Each time when senior U.S. officials come to China, currency has always been a major topic," said a dealer at an Asian bank in Shanghai. "NDFs responded to the U.S. duty news today, although China typically doesn't yield to U.S. pressure in this issue."
China on Friday denounced the new U.S. anti-dumping duties as protectionist and vowed to protect the interests of its industry. [ID:nSP112171]
Offshore one-year dollar/yuan NDFs <CNY1YNDFOR=> fell to 6.6270 bid in late trade on Friday from Thursday's close of 6.6430.
Twelve-month yuan appreciation implied by NDFs, which moves inversely with the forwards, rose to 3.03 percent measured from the Chinese central bank's daily mid-point, compared with 2.78 percent implied at Thursday's close.
However, in a sign that Beijing is not ready to change its stable yuan policy, the People's Bank of China fixed the yuan's daily mid-point <CNY=SAEC>, the reference rate from which the yuan can rise or fall up to 0.5 percent each day, virtually unchanged at 6.8276 to the dollar versus Thursday's 6.8277.
Accordingly, the onshore spot yuan rate <CNY=CFXS> was nearly flat, closing at 6.8273 to the dollar on Friday, compared with Thursday's close of 6.8276.
The Chinese central bank has kept the yuan at a virtual peg against the dollar since July 2008, confined to a range of only about 100 pips, partly to help insulate China's exports from the turmoil of the global financial crisis.
But with the worst of the crisis now likely over, and China's economy recovering faster than its major trading partners, Western policy makers have renewed calls for Beijing to allow the yuan to appreciate to help address trade imbalances. [ID:nSHA161204]
Chinese academics are deeply divided over whether Beijing should retain the yuan/dollar peg.
A senior government economist, Zhang Yuyan, said late on Thursday that the yuan's de facto dollar peg was unsustainable in the long run, citing factors including expected increasing pressure on currency policy in the coming months. [ID:nPEK133396]
In another sign of changing expectations of the yuan's long-term trend, offshore benchmark one-year dollar/yuan volatilities <CNY1YO=>, by which investors hedge their risks in the yuan/dollar exchange rate, jumped to 5.6 percent bid late on Friday from Thursday's close of 5.25 percent.