China’s Yuan May Be Best Asian Carry Trade

A gauge of the yuan’s risks and rewards shows it is the most attractive carry trade in Asia, spurring demand for Dim Sum bonds as exports (CNFREXPY) rebound.

The yuan’s Sharpe ratio, which measures returns adjusted for price swings, was 8.6 percent so far in the second half, compared with 3.9 percent for Thailand’s baht and 0.1 percent for India’s rupee. China’s ratio is second only to Argentina’s 25 percent among emerging markets. Yuan notes sold in Hong Kong completed a 21st straight week of gains, returning 2.3 percent since March 28, a FTSE Group and Bank of China Ltd. index shows.

Manufacturing in July rose at the fastest pace since April 2012 and exports drove a record trade surplus as Premier Li Keqiang cut small-business taxes and bank reserve ratios. The yuan gained 0.9 percent this quarter, paring 2014’s loss to 1.5 percent. Options traders are the most bullish on the yuan in eight months as the central bank signals it will tolerate gains.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.