SHANGHAI : China’s yuan had its best day of the year on Wednesday after trade data showed export growth beating expectations, highlighting the possibility that firms are manipulating trade invoices in order to skirt China’s capital controls and bet on yuan appreciation. China’s exports in April rose 14.7pc  from a year earlier, while imports grew 16.8pc, leaving the country with a trade surplus of $18.16b for the month. That compared with a deficit of $823m in March. Ahead of the trade data, the People’s Bank of China (PBOC) set its midpoint at its strongest level ever and sharply higher than Tuesday’s fix.
Spot yuan ended at 6.1410 per dollar, its highest close ever, after touching an intraday record of 6.1396 in afternoon trade.
The yuan has rebounded sharply since Monday, when it suffered its worst day in five months after China’s foreign exchange regulator released new rules to crack down on hot money inflows and fake trade invoicing.
The new rules jolted the market, with traders worrying that banks would have to buy a large amount of dollars in order to comply with new limits on long yuan positions.
But bullish yuan sentiment has now returned, with dealers saying that client demand for yuan remains significantly stronger than dollar demand.
The yuan has also gained support from expectations of policy reforms to liberalise the exchange rate.
Premier Li Keqiang told a cabinet meeting on Monday that the government would prepare an “operational plan” to achieve yuan convertibility on the capital account. Li specifically mentioned a plan for a pilot programme to allow overseas investment by individual Chinese investors.
Li’s statement also boosted expectations that the central bank will widen the yuan’s daily trading band in the coming weeks or months.
The PBOC’s record-high midpoint on Wednesday appeared to continue the campaign to bring the fixing closer to the spot rate, thereby preventing an abrupt one-off appreciation immediately following the band widening.
The central bank currently allows the dollar/yuan exchange rate to diverge by no more than 1 per cent from the midpoint it sets each morning.
At its closing level, the exchange rate was 0.92 per cent below the midpoint, down only slightly from the 0.95 divergence that the market maintained for most of the year.