Offshore Yuan Halts Four-Day Slide on Signs Economy Stabilizing

China Factory-Gate Deflation Eases

The offshore yuan ended a four-day slide as data released over the weekend signaled that growth in the world’s second-largest economy is beginning to stabilize.

China’s factory-gate deflation eased for the sixth month in a row, while consumer inflation accelerated more than expected. Factory-gate deflation that has persisted since early 2012 has been easing amid a rebound in property sales and higher commodities prices. This eases pressure on the central bank to provide more stimulus, according to Australia & New Zealand Banking Group Ltd.

The offshore yuan rose 0.04 percent to 6.7005 a dollar as of 4:51 p.m. in Hong Kong, prices compiled by Bloomberg show. The exchange rate fell 0.43 percent in the last four sessions. The currency traded in Shanghai’s onshore market weakened 0.09 percent to 6.6888 on Monday, while a Bloomberg replica of the CFETS RMB Index retreated 0.06 percent. A gauge of strength in the greenback climbed 0.6 percent Monday after U.S nonfarm payrolls data released Friday beat estimates.

"The People’s Bank of China may not conduct monetary easing as quickly as China’s inflation data is showing upside risks," said Eddie Cheung, a currency strategist at Standard Chartered Plc in Hong Kong. "The room for the yuan to weaken against the greenback is limited as the dollar’s strength won’t likely persist in the second half because we are not expecting the Federal Reserve to raise interest rates this year which will curb the dollar’s strength."

— With assistance by Tian Chen

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