The Chinese yuan remained under pressure today trading at 7.6035, as new and revised policies were announced helping to keep traders wary of two way trading in the underlying currency. In Beijing, the State Administration of Foreign Exchange decided to rescind previous policy that had promoted domestic companies in repatriating their funds back to China. Implemented to boost the yuan during the Asian financial crisis, the policy was scrapped in hopes to stem demand for the yuan and keep the currency from being traded in one direction. Additionally, government officials announced near term approval for three new stock oriented mutual funds to be available soon for institutional investors. Offerings include joint ventures with European banking firms as well as the British fund management firm Schroders. The new funds, which are expected to raise 30 billion yuan, are being formed in order to ease concerns over the illiquidity and speculated drop in local markets.



China GDP Set For Higher Pace
In a research note today, analysts at US based investment bank Goldman Sachs forecasted that growth in the Chinese economy is expected to accelerate at 12 percent pace in the third quarter. Citing supportive pressures from a 20 percent increase in industrial production, the estimates aren’t too far off from the truth as Chinese officials have produced little in the way of quelling overheating growth in the world’s fastest growing economy. Not only is production higher, it seems that according to estimates, double digit increases in investment and have propped up the need for further inflation curbing by headline officials. The report is likely to spur further rhetoric from Congress as recent policy adjustments by the Chinese officials have done little to appease the US’s appetite for further flexibility in the current foreign exchange regime. Notably, the animosity is likely to be exacerbated this week as government reports are expected to show the trade surplus widened yet again for the month and is on track to completely shatter the pace $177.5 billion in all of 2006.

Eyes Center On Singapore Growth Estimate
Expansion is expected to rise in the second quarter for the Singapore economy as export sector growth has remained supportive for the period. Although a preliminary report, the results are widely expected to repeat when further confirmation is printed later on in the quarter, helping to show that the economy is well on its way. Rising 6.1 on the yearly evaluation in the previous quarter, estimates are for a 6.7 percent rate of growth in the upcoming report, boosted by a 7.7 percent rate of expansion in the monthly assessment. Incidentally, improvements in pharmaceutical and electronics production look to have increased prospects considerably even as global demand has waned. In the overnight, the Singapore dollar was higher, trading at 1.5192.

Asian Markets Make It Higher For Consecutive Sessions
Regional markets gained in line with the Shanghai benchmark, as both Hong Kong and Singapore continued higher for consecutive sessions. Stocks in Hong Kong gained for a fifth straight session, climbing on the heels of development stocks. Notably, Cheung Kong Ltd. shares advanced to a seven year high after Chairman Li increased his stake in the company. The news lifted shares in subsequent development stock, including Sun Hung kai Properties. After all was said and done, the Hang Seng Index advanced 285.69 points or 1.3 percent to 22,817.43. Comparatively, the Singapore stock market made the most gains in 11 weeks ahead of the gross domestic product report. Leading the bullish push were shares in DBS Group and City Developments. DBS shares climbed 70 cents to S$23.10 as City Development stock rocketed higher by 2.4 percent to close at S$17.20. As a result, the Straits Times Index was able to climb 64.76 points to close at 3,626.72.

Richard Lee is a Currency Strategist at FXCM.