The yuan posted its biggest weekly drop since March as the greenback rallied and China’s economy showed no signs of picking up.
The Bloomberg Dollar Spot Index, which tracks the currency against major 10 peers, had its sharpest weekly increase in a month amid speculation the U.S. could raise interest rates as early as June. China’s consumer prices rose 1.4 percent in March from a year earlier, compared with the 1.3 percent median estimate in a Bloomberg survey, according to official data released Friday. Producer prices fell 4.6 percent, dropping for a record 37th month.
“Deflation pressure didn’t worsen, but inflation is still low,” said Liu Dongliang, a senior analyst at China Merchants Bank in Shanghai. “China’s economy still lacks momentum, and more monetary easing is needed. The advancing dollar is having a large impact on the yuan.”
The Chinese currency declined 0.21 percent this week and 0.03 percent on Friday to close at 6.2080 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The People’s Bank of China set the yuan’s reference rate at 6.1370 on Friday, 0.05 percent weaker than Thursday and 0.04 percent less than a week ago. The gap between the onshore spot rate and the fixing was 1.16 percent, within the 2 percent limit.
China will allow interbank lending in the greenback, euro and Hong Kong dollar from Monday, according to a statement posted on China Foreign Exchange Trade System’s website Friday.
The yuan traded in Hong Kong dropped 0.37 percent since April 3 to 6.2188 a dollar, data compiled by Bloomberg show. It declined for a fifth day on Friday, the longest losing streak in almost a year, weakening 0.07 percent.
— With assistance by Tian Chen