A GAUGE of swings in the yuan fell to the lowest level since November amid receding bearish bets and speculation that China’s central bank is helping keep the exchange rate stable.

    The currency’s three-month implied volatility, which is used to price options, dropped 13 basis points to 4.6 percent Friday in Hong Kong. The extra cost for three-month options to sell the yuan against the U.S. dollar in the Hong Kong market over contracts to buy was near the lowest level since September 2014.

    The signs of calm are a far cry from a year ago, when a record 1.9 percent yuan devaluation Aug. 11 ignited turmoil in global markets. This time, the People’s Bank of China is going to great lengths to maintain stability by setting a series of stronger reference rates after the currency weakened beyond 6.7 a dollar for the first time since 2010.

    “Sentiment is improving after the central bank showed its near-term defense of 6.7 per dollar,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. “The market is reassessing their views. I expect more portfolio flows to China’s bond market from offshore investors, which will support a balanced flow and the yuan in the second half of the year.”

    Foreign investors boosted holdings of China’s sovereign bonds for the ninth month in a row to 321.9 billion yuan (US$48.5 billion) in July, according to the latest official data.

    China will keep the exchange rate basically steady at an equilibrium level, the central bank said Wednesday. That goal is being made easier by signs that the world’s second-largest economy is stabilizing and by waning expectations of a Federal Reserve interest rate hike. (SD-Agencies)