Chinese trade boosted by yuan weakness, analyst says By Deborah Levine and William L. Watts, MarketWatch NEW YORK (MarketWatch) — The dollar was slightly higher versus most major currencies on Tuesday, and held ground against the euro, following reports that further aid may be in the works for Greece. “With speculation surrounding the plight of Greece, the euro has struggled to recover from last week’s losses and until a modicum of policy cohesion returns to the markets, we remain cautious,” said Chris Walker, a currency strategist at UBS. The euro EURUSD +0.0348% fell to $1.4269 in Asian trading hours, before paring losses to trade little changed at $1.4348 versus $1.4349 in late North American trading on Monday. The single currency has lost 3.1% this month, weighed by revived worries about Greece’s debt and expectations that the European Central Bank will wait longer before raising interest rates. The dollar index DXY -0.06% , which measures the greenback against a basket of six currencies, rose to 74.767 from 74.710. See real-time currency quotes and tools. Against the Japanese yen, the dollar USDYEN +0.4111% rose to ¥80.62 from ¥80.25 late Monday. The British pound GBPUSD -0.21% fell to $1.6352 from $1.6390. The Bank of England’s quarterly inflation report is due for release Wednesday. Dow Jones Newswires reported that Greece expects a new package worth nearly 60 billion euros ($86.1 billion) in aid to cover its funding needs into 2013. Also, German Chancellor Angela Merkel told reporters in Berlin that the government will await the result of an evaluation of the Greek bailout program by the European Central Bank, the International Monetary Fund and the European Commission before commenting on further steps, reports said. Analysts also noted that Greece was able to sell short-term notes at a relatively tolerable rate, under 5%, though demand wasn’t strong. ”Dealers tested the downside for the euro before showing willingness to step in and buy the single unit,” said Andrew Wilkinson, senior market analyst at Interactive Brokers. On Monday, Standard & Poor’s Ratings Services cut Greece’s long-term sovereign-credit rating to B from BB-minus. Read more on S&P downgrade of Greece. Chinese data, yuan Currency traders took little direction from data out of China, showing the nation’s trade surplus for April widened far more than analysts had expected, as export growth surged. Read more on China trade data. “Today’s data show that Chinese exporters continue to benefit from a supportive exchange rate,” said strategists at RBC Capital Markets. Although the Chinese yuan USDCNY -0.0231% is posting moderate gains against the U.S, dollar, it’s lost ground against other major currencies, they said, “so in trade-weighted terms China has seen its currency weaken over the last six months or so,” which is “helping to boost its exports, but is also contributing to stronger inflation.” This data will likely give fodder to U.S. officials calling for Beijing to allow faster currency appreciation, the RBC strategists said, “but more importantly should persuade Chinese policy makers that a stronger [yuan] can be tolerated by the economy and is warranted as part of their efforts to curb price pressures.” Read more on China-U.S. talks. They forecast the dollar to move to 6.40 yuan by the middle of the year and to 6.20 yuan by the end of the year. On Tuesday, one U.S. dollar bought 6.4939 yuan in currency spot trading. The People’s Bank of China set the dollar’s daily mid-point at a record high of 6.4950 yuan, stronger than Monday’s historical high of 6.4988 yuan.

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