China Interest-Rate Swap Rises, Yuan Set Stronger Before Inflation Report

China’s six-month interest-rate swap rate climbed for a third day and the yuan was set stronger on speculation the central bank will raise borrowing costs in coming months to curb accelerating inflation.

China will become “more aggressive” in increasing rates and continue ordering banks to set aside more reserves, according to Jun Ma, chief economist for Greater China at Deutsche Bank AG. The country may allow a faster appreciation of the yuan, Ma said in the report.

The six-month swap rate, a fixed cost for receiving the seven-day repurchase rate, climbed three basis points to 2.38 percent. The People’s Bank of China raised the reference rate 0.31 percent to 6.6242 per dollar, the strongest level since a peg against the dollar was scrapped in July 2005, according to China Foreign Exchange Trade System. That was the biggest gain since June 22.

To contact the reporter on this story: Sandy Hendry in Hong Kong at shendry@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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