China’s yuan posted its biggest decline in almost two months after the central bank lowered the reference rate by the most since December, spurring speculation policy makers will halt currency appreciation to aid exporters. The People’s Bank of China weakened the daily fixing by 0.07 percent to 6.8285 per dollar, a move that may be a “political gesture” before U.S. Treasury Secretary Timothy Geithner starts a visit to China on June 1, said Huang Yi, a foreign-exchange trader at Guangdong Development Bank Co. “The reference rate signals that the authorities still don’t want to permit gains in the yuan,” said Huang at the Guangzhou-based bank. The currency dropped as much as 0.09 percent to 6.8297 per dollar and traded at 6.8290 as of 11:58 a.m. in Shanghai, compared with 6.8238 yesterday, according to the China Foreign Exchange Trade System. China has pledged to keep the yuan basically stable as the economy expanded 6.1 percent in the first quarter, the slowest pace in almost a decade. It allowed the yuan to slide 0.7 percent in the first week of December when Henry Paulson, Geithner’s predecessor, traveled to China for trade talks. Favoring Stability “After this artificial adjustment in the reference rate, the market still believes the government is favoring a stable currency,” said Huang Huawei, a foreign-exchange trader at Shenzhen Development Bank Co. in Shenzhen. “So, demand for the dollar is not quite strong and the yuan is trading close to the reference rate.” Twelve-month non-deliverable yuan forwards fell 0.28 percent to 6.7035 per dollar, the most since May 6, and last traded 0.1 percent lower at 6.6920, according to data compiled by Bloomberg. The U.S. Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose for a second day. The gauge declined 3.7 percent last week, the most since the period ended March 20. Geithner said in January that the Obama administration believes China is “manipulating” its currency to give an unfair advantage to its exporters, an allegation denied by both the Chinese government and the People’s Bank of China. Bonds Fall Government bonds fell on speculation China’s securities regulator will resume new public offerings of shares next month, reducing funds available for debt purchases. China may resume new listings on its stock exchanges next month and 32 companies are waiting to sell a combined 14.3 billion shares, the Shanghai Securities News newspaper reported yesterday. “The IPO resumption speculation led to bearish sentiment in the bond market,” said Tang Guohui, a fixed-income analyst at Industrial Securities Co. in Shanghai. “Investors are cutting positions after the previous rally.” The yield on the 1.77 percent note due December 2013 climbed five basis points to 2.30 percent, and the price of the security dropped 0.20 per 100 yuan face amount to 97.73, according to the China Interbank Bond Market.

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