Beijing Helps to Drive Yuan Higher Against U.S. Dollar

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from The Wall Street Journal,

Sudden gains have taken traders by surprise after four months of losses.

China’s yuan recorded its best week in over seven years, as Beijing stepped into the markets to drive the currency higher and outflank investors betting on losses as the economy cools.

The yuan gained 0.9% against the U.S. dollar since a week earlier, a sharp move for a currency that lost 2.5% against the greenback all of last year. It was only the third time in 20 years that the yuan made a weekly move of that magnitude.

The sudden gains serve as a reminder that Beijing still keeps a firm grip on the currency and won’t allow heavy losses or one-way speculation. Capital has also been flowing out of China this year as the yuan has weakened—such currency depreciation turns off investors seeking higher-yielding assets. Worries linger that further yuan losses could exacerbate the trend and destabilize the already fragile financial system.

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