Chinese Yuan Touches 2-month Low As Country Reports First Trade Deficit In 3 Years

The Chinese yuan weakened on Wednesday, touching its softest level against the dollar in nearly two months after official data revealed that in February the world's second-largest economy recorded its first trade deficit in three years. One dollar bought 6.911 yuan in recent trade, compared with 6.9025 yuan at the close of local trading on Tuesday. China's balance of trade declined from a surplus to a deficit of $9.2 billion last month, compared with expectations for a $27 billion surplus. China reported on Tuesday that its foreign-currency reserves climbed back above the $3 trillion mark last month, the first rise in eight months. "Despite being well aware of distortions caused by the Lunar New Year, investors were surprised by the news that China recorded a trade deficit in February," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman, in a Wednesday research note. While the yuan's intraday move was relatively muted, "the massive deterioration in China's terms of trade could become a much more serious issue [for the yuan] if the data does not rebound next month," said Boris Schlossberg, managing director of currency strategy at BK Asset Management.

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