China’s yuan extended gains for a fourth straight session on Friday and was headed for its best quarter since June 2008, helped by a weaker dollar and better-than-expected manufacturing data. The People’s Bank of China set the yuan midpoint at 6.7744 per dollar prior to market opening, its strongest level since November 7, 2016. The strength in the official guidance reflected weakness in the dollar, which sank to a near nine-month low against a basket of currencies in the overseas market.
The dollar was bogged down by growing expectations of more hawkish monetary policies in Europe and Canada and doubts about another U.S. interest rate increase this year. The yuan was up about 1 percent for the week, set for its best week since July 2005, and gained 1.7 percent against the dollar for the quarter. China’s manufacturing sector expanded at its quickest pace in three months in June, buoyed by strong production and new orders, reassuring news for authorities trying to strike a balance between de-leveraging and keeping the economy on an even keel.
The official manufacturing Purchasing Managers’ Index (PMI) was at 51.7 in June, the eleventh straight month of expansion, and up from 51.2 in May, a monthly survey by the National Bureau of Statistics showed on Friday. Separately, official data showed that China recorded a surplus in its capital and financial account in the first quarter, indicating net capital inflows as policymakers tightened supervision of outflows.
In other Asian currencies, the Malaysian ringgit gained 0.1 percent and the Philippine peso snapped three straight days of losses. “The Asian net portfolio flow environment remains generally supportive except for the Indian rupee, where inflow momentum continues to moderate,” OCBC said in a note. The Indian rupee was set for its fourth straight day of declines, losing as much as 0.2 percent to hit a two-week low.
South Korea’s won traded down as much as 0.5 percent on Friday, its lowest level in over 11 weeks, as investors backed away from emerging markets in the wake of a broad decline in global stock markets. South Korean bond sales by Franklin Templeton raised concerns over potential capital outflows, putting further pressure on the won. U.S. President Donald Trump will press South Korean President Moon Jae-in to solve trade differences over cars and steel in meetings in Washington focusing on the nuclear threat from North Korea. South Korean shares edged down after a big rebound the previous day, with the Korea Composite Stock Price Index (KOSPI) down 0.5 percent at 2,384.57 points. The won has fallen about 2.1 percent this quarter.
The Singapore dollar rose for a fourth consecutive day on Friday, up as much as 0.2 percent, touching it highest in more two weeks. Singapore’s total bank lending in May rose 0.32 percent from April as lending to general commerce increased, central bank data showed on Friday. Bank lending in May rose 6.8 percent from a year earlier. The Singapore dollar gained 1.4 percent in the quarter and is headed for its second straight quarter of gains.