Yuan forwards rise on stress tests for exporters

The 12-month non-deliverable contract retreated earlier in the week after Premier Wen Jiabao said March 14 that the yuan was not undervalued, rebuffing U.S. calls for China to scrap a de facto dollar peg that was introduced in July 2008. U.S. senators revived a bill this week that would determine if a nation's currency is undervalued, and if so, allow import duties to be slapped on the incoming goods.

“A couple of weeks back there was similar news that they were trying to assess how much appreciation exporters can take,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong.

The yuan's 12-month forwards gained 0.15 percent to 6.6610 per dollar as of 5:30 p.m. in Hong Kong, trimming this week's drop to 0.5 percent, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 2.5 percent from the spot rate of 6.8265.

The currency strengthened 21 percent in the three years leading up to the current peg, which was introduced to help China's exporters weather a global recession.

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