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Dollar Climbs as Yuan Slides After Rate Cut; Oil Retreats

(Bloomberg) — The dollar rallied, climbing to a two-year high versus the yuan after China’s interest-rate cut underscored diverging economic outlooks for the U.S. versus the rest of the world. Oil retreated following its first monthly gain since June.

The Bloomberg Dollar Spot Index increased 0.2 percent at 7:09 a.m. in London, gaining versus 13 of 16 major peers as China’s currency traded at its weakest level since October 2012 and the euro slipped 0.2 percent. Gold climbed 0.7 percent. Futures on the Euro Stoxx 50 Index rose 0.2 percent and those on the Standard & Poor’s 500 Index added 0.1 percent. Oil in New York and London dropped at least 0.8 percent after OPEC output exceeded its quota for a ninth month in February.

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China’s second rate cut in 14 weeks was the latest in a wave of global easing that’s pushed the Bloomberg dollar gauge toward its highest level in at least 10 years. A private measure of factory activity in Asia’s largest economy showed a faster-than-estimated expansion Monday as lawmakers prepare to meet in Beijing. The euro area updates on consumer prices and U.S. private spending data are due.

“It’s clear markets are being driven by other factors besides earnings, and key is the ongoing loose central-bank policy around the world,” Mark Lister, head of private wealth research at Craigs Investment Partners Ltd., which manages about $ 7.2 billion, said by phone from Wellington. “China is clearly slowing down, you don’t cut rates twice in three months if things are going stunningly well.”

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China Economy

The People’s Bank of China announced a benchmark lending and deposit rate cut of a quarter percentage point Saturday. A day later, a government factory gauge for February signaled contraction for a second month, underscoring the scope for looser policy.

The yuan traded at 6.2736 per dollar after the central bank reduced its reference rate to the weakest since November today. Today’s purchasing managers index from HSBC Holdings Plc and Markit Economics came in at 50.7, beating economists’ estimates for it to hold steady from a preliminary reading of 50.1. Readings above 50 denote expansion.

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The Bloomberg gauge of dollar strength traded at 1,174.29, less than one point from its highest level in at least 10 years. The greenback advanced at least 0.4 percent against the Australian and New Zealand currencies and was up 0.5 percent versus Russia’s ruble after protests in Moscow following the assassination of an opposition leader.

Bail In

The euro bought $ 1.1172. Austria won’t give fresh capital to Heta Asset Resolution AG, making the “bad bank” of failed Hypo Alpe-Adria-Bank International AG the first case under new European Union rules imposing losses on bank bondholders.

Gold for immediate delivery was at $ 1,222.19 an ounce, the highest level since Feb. 19. Imports to India may rebound after the government clarified that it has no plans to scrap a 10 percent duty on the yellow metal. Silver increased 0.9 percent to $ 16.7546, while platinum added 0.4 percent.

The Hang Seng Index climbed 0.2 percent. Property stocks rebounded after sliding at the close Friday as the Hong Kong Monetary Authority announced extra cooling measures for the city’s real-estate market. The Shanghai Composite was 0.7 percent higher after falling as much as 0.4 percent.

BYD Co., the maker of electric cars that’s partly owned by Warren Buffett, jumped 4 percent on speculation a popular documentary on smog may spur policies to tackle pollution.

Australia’s S&P/ASX 200 Index advanced 0.5 percent and South Korea’s Kospi index was 0.6 percent higher. Japan’s Topix index climbed 0.1 percent as the yen slipped 0.2 percent to 119.82 per dollar.

U.S. Stocks

Futures on the Nasdaq 100 Index were 0.2 percent higher. The Nasdaq Composite Index on Friday capped its biggest monthly advance since January 2012 after Apple Inc. climbed 9.6 percent during February.

The MSCI All-Country World Index touched a record intraday high Feb. 26, capping its best month since January 2012 as more than $ 3 trillion was added to the value of global equities.

The U.S. economy grew at an annualized pace of 2.2 percent in the fourth quarter, beating the 2 percent rate predicted by economists, a report Friday showed. Data on U.S. manufacturing is also due Monday, along with factory gauges for the euro region to India.

West Texas Intermediate crude fell 0.8 percent to $ 49.37 a barrel. The Organization of Petroleum Exporting Countries pumped 30.6 million barrels a day in February, above the group’s output target of 30 million a day, according to a Bloomberg survey. Brent dropped 0.8 percent to $ 62.11 a barrel.

WTI jumped 3.3 percent Friday and capped a monthly gain of 3.2 percent amid signs the more-than 50 percent slump in oil prices since June is curbing new drilling in the U.S. The number of crude rigs in service in the U.S. fell to 986 last week, the lowest level since June 2011, according to data from Baker Hughes Inc.

Copper for three-month delivery on the London Metal Exchange rose 0.8 percent to $ 5,943 per tonne. The metal climbed 7.3 percent last month, the most since 2012, amid speculation China — the world’s biggest consumer of industrial metals — would expand stimulus to stoke growth.

To contact the reporters on this story: Emma O’Brien in Wellington at [email protected]; Nick Gentle in Hong Kong at [email protected]

To contact the editors responsible for this story: Nick Gentle at [email protected] Michael Patterson

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