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USDYEN Breaks 1 Hundo

“The U.S. dollar just hit the key ¥100 psychological level against the Japanese yen!

The currency pair hasn’t traded north of ¥100 since April 14, 2009.

The chart below shows the big downward move the yen has made…”

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The Aussie and Kiwi Rally as Employment Surges in the Region

“Australian and New Zealand jobs growth surged, sending the currencies soaring and undermining central bank efforts to relieve pressure on manufacturers and exporters.

The number of people employed in Australia rose by 50,100 in April from a month earlier, more than four times economists’ estimates, and the jobless rate unexpectedly fell to 5.5 percent, government data showed today. New Zealand employers added a record 38,000 jobs last quarter and its unemployment plunged to a three-year low of 6.2 percent. Economists expected 6.8 percent.

Both currencies surged to levels that preceded the Reserve Bank of Australia’s decision two days ago to cut the benchmarkinterest rate to a record low and New Zealand Governor Graeme Wheeler’s announcement a day later that he has intervened to weaken the kiwi. South Korea also cut rates today to ease pressure on exporters. The surge in Australian jobs may undermine the case for RBA Governor Glenn Stevens to add to 2 percentage points of reductions in the past 19 months.

“Reserve Bank Board members probably winced when they heard the job numbers,” said Craig James, a senior economist at a unit of Commonwealth Bank of Australia, the nation’s biggest lender. “The Reserve Bank will probably leave a rate cut on the table over the next few months. But more figures like this and it clearly won’t be acting on the easing bias.”

Currency Reaction

The Australian dollar jumped as high as $1.0254 from $1.0165 before the jobs data. The three-year bond yield rose six basis points, or 0.06 percentage point, to 2.57 percent. The move in yields was the biggest since March 25.

The kiwi bought 84.61 U.S. cents at 6.24 p.m. in Wellington from 84.09 cents before the report. The currency had declined to a five-week low yesterday…”

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A Strengthening Yen Helps to Pare Gains in Asia

“Asian stocks dropped, with the regional benchmark index retreating from a five-year high. Japan’s Topix Index erased gains as the yen strengthened, dimming the outlook for the nation’s exporters.

Canon Inc. (7751), which loses almost $80 million for every 1 yen Japan’s currency gains against the dollar, fell 1 percent. Bridgestone (5108) Corp., the world’s biggest tire maker, sank 6.6 percent in Tokyo after keeping its full-year profit forecast below analyst estimates. GS Engineering & Construction Corp. jumped 6.8 percent after the Bank of Korea cut interest rates….”

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The Euro Jumps as German Factory Orders Strengthen

“The euro strengthened against the dollar and yen after German factory orders unexpectedly increased in March, suggesting the region’s largest economy is starting to grow again.

The 17-nation currency rose against all except one of its 16 major peers as the German data damped speculation the European Central Bank will ease monetary policy further after President Mario Draghi said last week the ECB had an open mind about a negative deposit rate.Australia’s dollar fell to a two- month low against the greenback after the central bank cut interest rates to a record low. Sweden’s krona strengthened as industrial production (SWIPNSYY) exceeded economists’ forecasts.

“The German data was far better than expected,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “Today’s data suggests that we are another step away from them cutting the discount rate to negative territory.”

The euro gained 0.4 percent to $1.3123 as of 7:29 a.m. New York time after climbing to $1.3243 on May 1, the highest since Feb. 25. The single currency advanced 0.3 percent to 130.21 yen after dropping as much as 0.5 percent. The yen was little changed at 99.22 per dollar.

The euro is likely to trade between $1.30 and $1.32 until “data gives us strong direction one way or another,” Rabobank’s Foley said.

German factory orders, adjusted for seasonal swings and inflation, increased 2.2 percent from February, the Economy Ministry in Berlin said. The median estimate in a Bloomberg News survey of economists was for a 0.5 percent decline.

ECB ‘Ready’….”

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The Yuan Rises as China Pledges to Keep Currency Controls in Focus This Year

“The yuan strengthened the most this year as Premier Li Keqiang pledged to come up with a plan this year that would allow investment capital to move more freely in and out of China.

The proposal, part of the government efforts to loosen control over the currency and interest rates, will include a mechanism enabling individuals to invest overseas, the nation’s Cabinet said yesterday. People’s Bank of China Deputy Governor Yi Gang said last month the yuan’s trading band will be widened “in the near future.” The central bank raised the daily reference rate0.05 percent to 6.2083 per dollar, shy of the record 6.2082 on May 2. The currency is allowed to diverge a maximum 1 percent from the fixing.

China is moving forward with exchange-rate reform and making the yuan more globally used,” said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd. “There have been bets the trading band will be widened, giving more room for appreciation. Yet, it’s unlikely to happen soon as that might fuel speculation and worsen inflation.”

The yuan rose 0.2 percent, this year’s largest one-day gain, to close at 6.1541 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It dropped 0.18 percent yesterday, the most since December, as China intensified scrutiny of cash transfers from abroad. The currency has gained 1.2 percent this year and touched a 19-year high of 6.1521 on May 6.

Offshore Market

In Hong Kong, the yuan gained 0.28 percent, the most in four months, to 6.1585 per dollar, according to data compiled by Bloomberg. It dropped 0.35 percent yesterday, the biggest loss since March 2012, after the currency regulator said it would step up efforts to ensure companies and banks are not bringing in cash for speculative purposes….”

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The Aussie Falls as Australia Cuts Benchmark Interest Rates

“The Reserve Bank of Australia cut its benchmark interest rate to a record low, driving down a currency that has damaged manufacturing and boosted unemployment.

Governor Glenn Stevens reduced the overnight cash-rate target by a quarter percentage point to 2.75 percent, saying in a statement that the Aussie’s record strength “is unusual given the decline in export prices and interest rates.” Eight of 29 economists predicted the seventh cut in the past 19 months, while money markets had seen about a 50-50 chance.

“The board has previously noted that the inflation outlook would afford scope to ease further,” Stevens said. “At today’s meeting the board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy.”

He joins global counterparts in embracing record-low rates in an economy where inflation is contained, mining spending is predicted to crest, and credit growth remains subdued. Stevens is aiming to rebalance growth as mining regions in the north and west thrive and manufacturers in the south and east struggle.

“It’s a seminal decision to put a 2 in front of a decimal point for interest rates, and the RBA has decided to maintain its easing bias,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney who predicted today’s decision. “The currency has been the thorn in their side and the inflation data was the catalyst to act on the exchange rate concern.”

Currency Reaction

The Australian dollar fell to $1.0199 at 5:19 p.m. in Sydney, from $1.0238 before the decision. Three-year government bond yields dropped to as low as 2.47 percent, the least since Oct. 16. The benchmark S&P/ASX 200 Index (AS51) pared a loss of as much as 0.7 percent to close 0.2 percent lower….”

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The Yen Falls for a Third Day Trying to Break 100 to the Greenback

“The yen fell for a third day, approaching 100 per dollar, as a decline in the U.S. jobless rate to a four-year low fueled optimism that growth is gathering pace, reducing demand for Japan’s currency as a haven.

The euro strengthened against the yen as data showed the region’s services and manufacturing industries shrank less in April than initially estimated. Australia’s currency slid after a report today showed retail sales shrank. The Malaysian ringgit rose to the highest in 1 1/2 years against the dollar after Prime Minister Najib Razak’s coalition was re-elected. Sweden’s krona weakened as a report showed the slump in the nation’s services eased less than economists predicted…”

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The Aussie Dollar Trades Lower on Weak Retail Sales and No Easing Expectations

Australia’s dollar fell after data showed retail sales unexpectedly contracted in March, adding to speculation a weakening economy will prompt the central bank to cut interest rates to a record low.

The so-called Aussie dropped to its weakest since October 2009 versus New Zealand’s dollar amid prospects monetary policy will diverge in the two nations over the coming year. There is a 53 percent chance that the Reserve Bank will lower its 3 benchmark rate tomorrow, according to Bloomberg calculations based on overnight-index swap rates.

“The Aussie will remain heavy and probably gravitate toward the downside following the retail sales number,” said Jim Vrondas, the Sydney-based chief currency and payment strategist at OzForex Ltd. “The RBA is unlikely to cut tomorrow, though they’ll probably maintain an easing bias. That should give the Aussie some support.”

The Australian dollar declined 0.5 percent to $1.0271 as of 5:4 p.m. in Sydney. It fell 0.1 percent to 102.03 yen. The Aussie slid to as low as NZ$1.2016, the weakest since October 2009, before buying NZ$1.2034, 0.5 percent lower than the May 3 close. New Zealand’s dollar rose 0.1 percent to 85.41 U.S. cents. The currency advanced 0.5 percent to 84.85 yen.

Policy Rates…”

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The Dollar Halts it Largest Advance Against the Euro

“The dollar snapped its biggest advance against the euro in two weeks before the U.S. releases April jobs data after the previous report disappointed with employers adding the fewest positions in nine months.

The euro yesterday dropped versus 15 of its 16 major peers after European Central Bank President Mario Draghi said policy makers may take the unprecedented step of charging banks to hold excess reserves. Australia’s dollar was set for its longest weekly losing streak versus the New Zealand currency in 12 years as traders raised bets the bigger nation’s Reserve Bankwill cut borrowing costs next week.

“The data has softened recently and that could show up in non-farm payrolls,” said Richard Grace, the Sydney-based chief currency strategist and head of international economics atCommonwealth Bank of Australia. “If the number is weak, theU.S. dollar will go down a little as will long bond yields.”

The dollar traded little changed at $1.3067 per euro as of 7:11 a.m. in London after rising 0.9 percent yesterday, paring this week’s decline to 0.3 percent.

The U.S. currency fetched 98.10 yen from 97.94 yesterday and 98.05 on April 26. The 17-nation euro was at 128.16 yen from 127.95, heading for a 0.3 percent climb on the week.

Japanese markets are closed today and on May 6 for holidays.

Payrolls increased by 140,000 workers after an 88,000 gain in March, according to the median forecast of economists surveyed by Bloomberg News before a Labor Department report. Theunemployment rate may have stayed at 7.6 percent, matching March’s reading as the lowest since December 2008.

Fed, ECB…”

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The Yuan Hits a 19 Year High After China’s Central Bank Raises Currency Reference

China’s yuan advanced to a 19-year high after the central bank raised the currency’s reference rate by the most in more than six months amid speculation U.S. monetary stimulus will spur faster gains. Volatility surged.

The yuan strengthened 0.15 percent to close at 6.1560 per dollar from April 26 in Shanghai as markets reopened after a three-day holiday, according to the China Foreign Exchange Trade System. The People’s Bank of China set the fixing 0.2 percent stronger, the most since Oct. 15, at 6.2082 per dollar….”

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The Euro Manages to Rise on Benchmark Interest Rate Cut

“The euro strengthened for a fifth day against the dollar as the European Central Bank cut its benchmark interest rate to a record 0.5 percent in line with economists’ forecasts.

The 17-nation currency gained for a fourth day versus the yen even after a euro-area report showed the manufacturing industry shrank last month. ECB President Mario Draghi will hold a press conference at 2:30 p.m. in Bratislava, Slovakia, where the policy meeting was held. Sweden’s krona weakened against all except two of its 16 major counterparts as manufacturing in the nation unexpectedly contracted….”

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The $DXY Falls to an Eight Week Low

“The Dollar Index (DXY) dropped to an eight- week low amid speculation the Federal Reserve will affirm its commitment to maintaining bond purchases when it announces its policy decision today.

The U.S. currency weakened for a fourth day against the euro before an industry report forecast to show America’s private employers added the fewest jobs in six months. The Fed is buying $85 billion of bonds a month as part of its quantitative-easing strategy to put downward pressure on borrowing costs. The pound strengthened after U.K. manufacturing shrank less than economists predicted last month. Australia’s dollar fell after Chinese manufacturing growth slowed.

“Into the Fed meeting I think that we’re going to see further U.S. dollar selling pressure,” said Hans-Guenter Redeker, head of global foreign-exchange strategy at Morgan Stanley in London. “The Fed is going to signal that it’s going to stay accommodative, that it’s going to reconfirm the link between unlimited quantitative easing and the state of the economy.”

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 81.58 at 7:01 a.m. in New York after dropping to 81.569, the lowest since Feb. 28.

The dollar declined 0.2 percent to $1.3191 per euro after depreciating to $1.32, the weakest level since April 17. The greenback was little changed at 97.53 yen. The euro strengthened 0.3 percent to 128.66 yen.

The U.S. currency may decline below 94 yen within the next three weeks, Morgan Stanley’s Redeker said.

Fed Purchases…”

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The Aussie Dollar Holds Gains on Expectations of Global Easing

Australia’s dollar held a two-day gain versus the U.S. currency on bets the Federal Reserve will affirm its commitment to so-called quantitative easing at the end of a policy meeting today.

New Zealand’s kiwi dollar maintained its biggest monthly advance against the greenback since September ahead of U.S. data forecast to show manufacturing activity cooled and private employers added the fewest jobs since October. Factory production expanded in China, the biggest trading partner of both South Pacific nations.

“Not everything is all bright and rosy” in the U.S., Janu Chan, a Sydney-based economist at St. George Bank Ltd., said on a conference call with clients. “QE from the Fed and elsewhere can only mean further upside for the Australian dollar.”

The so-called Aussie slid 0.2 percent to $1.0353 as of 5:01 p.m. in Sydney, following a 0.9 percent gain over the previous two days. The New Zealand dollar added 0.1 percent to 85.72 U.S. cents, after rising 2.3 percent in April.

Two-year Australian bond yields touched 2.56 percent, the lowest since Nov. 1. Ten-year rates were little changed at 3.1 percent.

Prospects the Fed will taper its $85 billion of monthly bond purchases have diminished amid a slowing economic recovery. Minutes from the March meeting show several Fed officials discussed slowing the pace of stimulus.

Private employment rose by 150,000 in April after gaining 158,000 the previous month, data from the Roseland, New Jersey- based ADP Research Institute will probably show today, according to the median estimate of economists surveyed by Bloomberg News.

U.S. Manufacturing

The Institute for Supply Management manufacturing index, sank to 50.6 in April from March’s 51.3, a second consecutive decrease, according to a separate Bloomberg poll ahead of today’s release. Readings above 50 signal expansion….”

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The Pound Lifts Against the Dollar and the Euro for the First Monthly Gains in a While

“The pound headed for its biggest monthly gain versus the dollar since September as a report showed British banks granted more loans for homes in March than analysts predicted, adding to signs the economy is improving.

Sterling was set for its first monthly advance against the euro since July even as a report showed U.K. consumer confidence unexpectedly declined in April. Futures traders decreased their bets that the pound will weaken against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed last week. U.K. government bonds were little changed as the Debt Management Office sold 50-year inflation-linked gilts at a record-low yield.

“If you look at speculative positions, accounts are still fairly short the pound,” said Kasper Kirkegaard, a senior currency strategist at Danske Bank A/S (DANSKE) in Copenhagen, referring to a bet that the price of an asset will fall. “That’s been gradually scaled back and we can see potential for it to go even higher in the short term.”

The pound was little changed at $1.5479 at 12:38 p.m. London time after climbing to $1.5546 yesterday, the most since Feb. 15. The U.K. currency has gained 1.9 percent this month. Sterling traded at 84.47 pence per euro after appreciating to 83.98 pence on April 26, the strongest since Jan. 24. It has risen 2 percent against the common currency in April.

Britain’s currency may weaken to $1.43 and 88 pence per euro in six months’ time, Danske Bank’s Kirkegaard said. The median predictions in Bloomberg surveys of economists and strategists is for the British currency to end the year at $1.49 and 85 pence per euro.

Mortgage Approvals…”

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The Aussie Dollar Gains Against Most Peer Currencies

“The Australian dollar rose to the highest in almost two weeks against its U.S. counterpart before the Federal Reserve opens a two-day meeting amid speculation it will maintain bond purchases for the foreseeable future.

The so-called Aussie rose against most of its major peers as Asian stocks gained and data showed private sector credit increased in March. Demand for New Zealand’s dollar was limited after the nation’s building approvals unexpectedly declined, easing pressure on the Reserve Bank to tighten monetary policy.

“There could be more reserve diversification flowing into currencies like the Australian dollar,” said Jonathan Cavenagh, a strategist at Westpac Banking Corp. (WBC) in Singapore. “The general consensus is that the Fed is going to remain fairly dovish. The question is not whether or not quantitative easing is going to be maintained, but if it’s going to be stepped up, and that’s played a part in the U.S. dollar’s recent selloff.”

The Australian dollar touched $1.0372, the highest level since April 17, before trading 0.1 percent higher than yesterday at $1.0358 as of 5:08 p.m. in Sydney, trimming its monthly slide to 0.6 percent. The currency rose 0.2 percent to NZ$1.2105. New Zealand’s dollar slid 0.1 percent to 85.57 U.S. cents.

Australian government bonds rose, with the yield on 10-year debt falling one basis point, or 0.01 percentage point, to 3.09 percent, after touching 3.077 percent, matching the lowest since Nov. 19. The three-year rate dropped as low as 2.57 percent, a level unseen since Dec. 3.

The MSCI Asia Pacific Index of stocks climbed 0.8 percent, following a 0.7 percent gain in the MSCI World Index yesterday.

FOMC Meeting…”

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The Kiwi Continues on it’s Longest Bull Run in Two Years

New Zealand’s dollar climbed versus most of its major peers before data forecast to show building permits rose to a five-year high, after the central bank said a housing boom could force it to raise interest rates.

The nation’s currency, nicknamed the kiwi, held its longest stretch of weekly gains in two years against the so-called Aussie dollar on bets the spread to the Reserve Bank of Australia’s benchmark rate will narrow. New Zealand’s currency extended a weekly advance against the greenback after data showed the U.S. economy grew less than expected. Australian bond yields fell to the lowest since November….”

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The Philippines Joins Thailand and S.K. in Tempering Currency Appreciation

“The Philippine central bank is considering adjustments to its so-called special deposit accounts, signaling it may limit access to the facility to cut costs and enhance its scope to cool currency gains.

“We would like to consider ways to make the SDA function more as a monetary instrument rather than an investment vehicle,” Governor Amando Tetangco said on April 27 in an e- mail response to questions. “The exact form of these refinements will be made known in time, but as in our practice, any adjustments we will make will be gradual and phased in.”

The possible change in the SDA, which hold about $46 billion, comes after Bangko Sentral ng Pilipinas on April 25 cut the rate it pays on the deposit facility for a third time this year. The monetary authority has lowered borrowing costs, banned foreign funds from the special accounts and revised rules to spur outflows, joining South Korea and Thailand in stepping up efforts to temper currency appreciation.

“The central bank is trying to manage its costs so it will have greater flexibility to intervene in the currency market,” said Ricky Cebrero, executive vice president and head of treasury at Manila-based Philippine National Bank. (PNB) “If the BSP limits SDA access through trust accounts in the near future, some funds may shift to bank deposits subject to an 18 percent reserve requirement. That will further reduce BSP’s costs.”…”

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The Euro Falls on Lower Manufacturing Data

“The euro fell to a two-week low against the dollar as a report showed services and manufacturing output in the region shrank for a 15th month, adding to signs the recession is worsening.

The single currency weakened against 13 of its 16 major counterparts as the data added to speculation the European Central Bank will cut interest rates to spur growth. The yen and the dollar strengthened after an industry report showed Chinese manufacturing expanded at a slower pace, increasing demand for safer assets. Sweden’s krona dropped to a four-month low against the U.S. currency after the nation’s unemployment rate unexpectedly increased in March.

“The overall picture is pretty bleak,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “The likelihood of the ECB cutting interest rates increased today. All in all, it’s negative for the euro.”

The euro declined 0.6 percent to $1.2985 at 10:02 a.m. London time after sliding to $1.2974, the weakest level since April 8. The 17-nation currency dropped 1.2 percent to 128.16 yen. Japan’s currency gained 0.5 percent to 98.69 per dollar….”

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The Aussie and Kiwi Fall on Poor China Data

“The Australian and New Zealand dollars fell against most of their major counterparts after a report signaled manufacturing slowed more than estimated in China, the biggest trading partner of both nations.

The so-called Aussie slid for a third day against the U.S. dollar after the data added to signs the global economic recovery is struggling, reducing the appeal of riskier assets. Australian and New Zealand government bond yields touched their lowest levels this year.

“We’re not seeing a sustained period of recovery in the China data, which is a bit of a concern,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore. “It’s a reflection of weaker global growth, and it’s not good news for the Aussie or the kiwi.”

The Australian dollar slid 0.3 percent to $1.0242 at 5:19 p.m. in Sydney after touching $1.0221, the lowest since March 11. New Zealand’s kiwi dollar dropped 0.5 percent to 83.86 U.S. cents after reaching 83.64 cents, the weakest since April 4.

The HSBC Manufacturing Purchasing Managers’ Index for China slipped to 50.5 this month from 51.6 in March. Economists in a Bloomberg News survey predicted 51.5. Readings above 50 signal expansion.

Data on April 15 showed China’s economy slowed in the first quarter. Gross domestic productexpanded 7.7 percent, compared to 7.9 percent growth in the three months to December. Economists projected 8 percent growth in a Bloomberg poll.

Rate Expectations…”

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The Yuan is Taking a Break After its Best Week in Six Months

“The yuan fell, following its best week in six months, after the People’s Bank of China set the currency’s fixing at a level that prevents it from strengthening.

The PBOC cut the reference rate by 0.03 percent to 6.2415 per dollar today. That’s more than 1 percent weaker than April 19’s closing price, meaning the currency had to fall to stay within its permitted trading band. China needs to sacrifice short-term growth to make structural adjustments, central bank Governor Zhou Xiaochuan told Bloomberg News outside a meeting of the International Monetary Fund in Washington on April 20. The economy expanded 7.7 percent in the first quarter from a year, earlier, compared with 7.9 percent in the previous three months.

“The market has downsized expectations for growth recently after a weak gross domestic product print,” said Sacha Tihanyi, a currency strategist at Bank of Novia Scotia in Hong Kong. “But I am still bullish on the yuan.”

The yuan fell 0.08 percent to 6.1826 per dollar in Shanghai, according to the China Foreign Exchange Trade System. The currency gained 0.24 percent last week, the most since the period ended Oct. 14. One-month implied volatility, a measure of exchange-rate swings used to price options, fell five basis points, or 0.05 percentage point, to 1.44 percent.

The 7.7 percent growth rate in the first quarter is “overall normal” compared with the government’s 2013 target of 7.5 percent, the PBOC’s Zhou said. “China’s undergoing economic restructuring, which sometimes is not in lockstep with growth,” he said….”

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