New York-based MSCI Inc will decide on Tuesday whether to add China's locally traded shares to its gauge, a decision that has the potential to move billions of dollars into mainland securities. The yuan also rose as the greenback dropped Monday after a French official cited the US president as saying the dollar's strength could be a problem. Barack Obama later denied making that comment.
"The yuan will become a more popular currency for global investments and the currency will be more internationalised if the MSCI includes China shares," said Ho Man Chun, a strategist at Bank of Communications Co's Hong Kong branch. "The weaker dollar is also supporting the yuan."
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The offshore yuan, which trades freely outside mainland China, climbed 0.05 per cent to 6.2122 a dollar as of 4:30 pm in Hong Kong, according to data compiled by Bloomberg. That was the biggest gain since May 21. The spot rate in Shanghai, which is constrained by a daily fixing, closed little changed at 6.2057, China Foreign Exchange Trade System prices show.
The nation's consumer-price index rose 1.2 per cent last month from a year earlier, the National Bureau of Statistics said Tuesday. That compares with the 1.3 per cent median estimate in a Bloomberg survey and April's 1.5 per cent increase. The producer-price index fell 4.6 per cent, extending a decline of more than three years.
The People's Bank of China raised its daily reference rate by 0.04 per cent to 6.1179 a dollar. The gap between the onshore yuan and the fixing was 1.4 per cent, within the 2 per cent daily trading limit. Even if the MSCI decides to include the yuan in its developing-nation index, it won't prompt immediate major inflows, HSBC Holdings Plc strategists wrote in a note Tuesday.