Yuan Gains as PBOC Raises Fixing, U.S. Data Damp Rate-Rise Bets

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The yuan rose to a one-week high as the central bank raised the currency’s fixing to the strongest in more than a year and U.S. retail sales fueled bets the Federal Reserve will delay an interest-rate increase.

The People’s Bank of China boosted the yuan’s daily reference rate by 0.05 percent to 6.1093 a dollar, the highest since February 2014. U.S. retail sales data for April missed projections, casting doubt on how soon the Fed will raise borrowing costs. A dollar gauge dropped for a third day.

The yuan advanced 0.05 percent, extending a three-day gain to 0.14 percent, to close at 6.2012 a dollar in Shanghai, according to China Foreign Exchange Trade System prices. In Hong Kong’s offshore market, the currency rose 0.04 percent to 6.2019 as of 5 p.m., according to data compiled by Bloomberg. The gap between the onshore yuan and the fixing was 1.5 percent, within the 2 percent daily trading limit.

“The yuan faces less pressure as the expectation for a Fed rate hike soon is lower,” said Chen Hufei, a macroeconomic policy analyst at Bank of Communications Co. in Shanghai. “The currency will mildly appreciate by the year-end because China’s fundamentals will improve as stimulus measures take effect.”

The PBOC, which has lowered benchmark borrowing costs three times and reserve-requirement ratios twice since November, will ease further, according to a Bloomberg survey. The one-year lending rate will be reduced to 4.85 percent by the end of 2015 from 5.1 percent, while the RRR will be lowered by 1 percentage point to 17.5 percent, according to the survey conducted May 10-12.

— With assistance by Tian Chen

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