Yuan Drops Most in Two Months on Signs China Is Halting Gains

From Bloomberg:

China’s yuan posted its biggest decline in almost two months after the central bank lowered the reference rate by the most since December, spurring speculation policy makers will halt currency appreciation to aid exporters.

The People’s Bank of China weakened the daily fixing by 0.07 percent to 6.8285 per dollar, a move that may be a “political gesture” before U.S. Treasury Secretary Timothy Geithner starts a visit to China on June 1, said Huang Yi, a foreign-exchange trader at Guangdong Development Bank Co.

“After this artificial adjustment in the reference rate, the market still believes the government is favoring a stable currency,” said Huang Huawei, a foreign-exchange trader at Shenzhen Development Bank Co. in Shenzhen. “So, demand for the dollar is not quite strong and the yuan is trading close to the reference rate.”

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