Offshore Yuan Drops a Fourth Day as Dollar Gains on Fed Minutes

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The offshore yuan fell for a fourth day, the longest declining streak this year, as the dollar climbed on signs the U.S. could raise borrowing costs as early as June.

Federal Reserve policy makers were split over whether to increase rates in June, according to minutes of their March 17-18 meeting released Wednesday in Washington. Interest-rate futures show a 57 percent chance the Fed will lift borrowing costs by mid-year, up from 55 percent two days ago. Eighty-nine percent see an increase by year-end.

The yuan traded in Hong Kong dropped 0.17 percent, the biggest decline in a month, to 6.2163 a dollar as of 4:52 p.m., data compiled by Bloomberg show. It has weakened 0.33 percent in four days, the longest losing streak since Dec. 9. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, rose 1.1 percent this week, after dropping 1.5 percent in the previous three days.

“The dollar recovered from last week’s loss as the market was surprised that an interest-rate increase in June was an option,” said Ho Man Chun, a Hong Kong-based strategist at Bank of Communications Co.’s branch in the city. The market “is confident the lift will take place by year-end,” he said.

China’s inflation rate was probably 1.3 percent in March, slowing from 1.4 percent in February, according to the median estimate in a Bloomberg survey before official data due Friday.

The onshore yuan declined 0.05 percent to close at 6.2060 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The People’s Bank of China lowered the yuan’s reference rate by 0.01 percent to 6.1338. The gap between the onshore spot rate and the fixing was 1.18 percent, within the 2 percent limit.

Twelve-month non-deliverable forwards strengthened 0.05 percent to 6.3275 a dollar, the first increase in four days, according to data compiled by Bloomberg.

— With assistance by Tian Chen

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