Yuan Gains Most in a Week as U.S. Trade Data Damps Fed Rate Bets

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China’s yuan rose the most in a week as data showing a wider U.S. trade deficit raised doubts about whether the economy is strong enough to warrant an increase in interest rates by the Federal Reserve.

The trade shortfall increased 43.1 percent in March, the most in 18 years, official figures showed on Tuesday. That followed a report last week that indicated growth in the world’s largest economy stalled in first quarter, and added to speculation the Fed will delay lifting rates for the first time since 2006. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell 0.4 percent Tuesday, snapping a three-day gain. It lost 0.2 percent Wednesday.

“It’s unlikely that the Fed would raise interest rates anytime soon, considering the economic data released in the past week were so weak,” said Zhu Lixu, an analyst at Xiangcai Securities Co. in Shanghai. “That’s good news for the yuan, as less capital will flow out of China to chase the dollar.”

The yuan gained 0.09 percent, the most since April 29, to close at 6.2007 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The currency rose for a second day. The People’s Bank of China raised its daily fixing by 0.04 percent to 6.1156, the first increase in three days. The gap between the onshore yuan and the fixing was 1.39 percent, within the 2 percent limit.

In Hong Kong’s offshore market, the currency rose 0.08 percent to 6.2023 a dollar as of 4:51 p.m., data compiled by Bloomberg show.

The International Monetary Fund is close to declaring the yuan to be fairly valued and an official assessment will be made in reports on China’s economy in coming months, the Wall Street Journal reported Monday, without saying where it got the information. The IMF may abandon its long-held view that the yuan is undervalued as it considers whether to grant the currency reserve status, Markus Rodlauer, deputy director of IMF’s Asia Pacific Department, said last month.

— With assistance by Tian Chen

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