The yuan fell to this month’s low as China’s central bank cut the daily fixing by the most in almost six weeks amid strength in the dollar.
The People’s Bank of China lowered the yuan’s reference rate by 0.07 percent to 6.1345, the most since Feb. 27, after raising the fixing by 0.21 percent in the three previous trading sessions. The Bloomberg Dollar Spot Index rose for a second day after figures showed U.S. consumer borrowing beat analysts’ forecasts, giving a mixed picture on data over the past week that will likely determine when the Federal Reserve will increase interest rates this year.
“The consumer-credit figure offered a short-term boost to the dollar,” said Aaron Chan, director of retail sales at ADS Securities Hong Kong Ltd. “The market is expecting the Fed to increase interest rates this year, which will put depreciation pressure on the yuan throughout 2015.”
The currency dropped 0.08 percent to close at 6.2032 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The yuan earlier fell to 6.2065, the lowest level since March 30. The gap between the onshore spot rate and the fixing was 1.1 percent, within the 2 percent daily limit.
Monetary-policy tightening in the U.S. will reduce the appeal of emerging-market assets, just as China is targeting 7 percent economic growth in 2015, which would be the least in more than 15 years. Interest-rate futures show a 54 percent chance the Fed will raise borrowing costs by June and an 88 percent probability before year-end.
U.S. consumers borrowed $15.5 billion in February, more than the $10.8 billion the previous month, data showed Tuesday. That was above the median forecast in a Bloomberg survey of $12.5 billion and comes after reports in April showed employment and manufacturing growth missed estimates.
In Hong Kong’s offshore market, the yuan dropped 0.14 percent to 6.2081 a dollar, data compiled by Bloomberg show. Twelve-month non-deliverable forwards declined 0.19 percent to 6.3315.
— With assistance by Tian Chen