China’s Yuan Advances as Slowing Economy Spurs Stimulus Bets

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China’s yuan rose the most in two weeks as the slowest economic growth since 2009 spurred speculation the nation will announce more stimulus measures.

Gross domestic product expanded 7 percent in the three months through March, the statistics bureau said in Beijing Wednesday. That matches the leadership’s full-year target as well as the median estimate in a Bloomberg survey. The government relaxed home-purchase rules last month, cut interest rates and reduced the ratio of deposits that banks have to set aside as reserves.

The yuan gained 0.11 percent to close at 6.2052 a dollar in Shanghai, China Foreign Exchange Trade System prices show. In Hong Kong’s offshore market, the currency advanced 0.1 percent to 6.2088, according to data compiled by Bloomberg.

“The yuan will remain stable this year on speculation the central bank will roll out more aggressive monetary and fiscal policies to support growth,” said Chen Hufei, a macroeconomic policy analyst at Bank of Communications Co. in Shanghai.

Industrial production climbed 5.6 percent in March from a year earlier, trailing the 7 percent median forecast in a Bloomberg survey, according to data released Wednesday. Retail sales rose 10.2 percent, missing the 10.9 percent estimate.

Foreign-exchange reserves dropped $113 billion to $3.73 trillion in the first three months of 2015, the third straight quarterly decline, data from the central bank showed Tuesday. Yuan positions on the People’s Bank of China balance sheet, a barometer of capital flows, slid a record 252.1 billion yuan ($40.6 billion).

The yuan’s one-month implied volatility, a gauge of foreign-exchange swings used to price options, fell as much as 19 basis points, or 0.19 percentage point, to an eight-month low of 1.26 percent. It was trading at 1.32 percent as of 4:46 p.m. in Hong Kong. The PBOC raised the yuan’s daily fixing by 0.11 percent, the most since March 19, to 6.1340 a dollar. The gap between the onshore spot rate and the fixing was 1.16 percent, within the 2 percent limit.

— With assistance by Tian Chen

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