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By Bloomberg

China’s yuan fell the most in more than two weeks after the central bank weakened the currency’s fixing and as the prospects of a Federal Reserve interest-rate increase and European stimulus boosted demand for the greenback.

The Bloomberg Dollar Spot Index climbed to the highest level since at least 2005 after European Central Bank President Mario Draghi said last week that he couldn’t exclude the risk of deflation in the region. China’s official Purchasing Managers’ Index fell to an 18-month low of 50.1 in December, according to a Jan. 1 report.

“The market came back into the new year with a new book trying to build some long dollar positions in the expectation the Fed would begin to normalize interest rates,” said Nizam Idris, the head of foreign-exchange and fixed-income strategy at Macquarie Group Ltd. in Singapore. “Draghi sounded really dovish and hinted at an easing policy.”

The yuan fell 0.26 percent, the most since Dec. 18, to close at 6.2200 a dollar in Shanghai, China Foreign Exchange Trade System prices show. The nation’s financial markets were shut Jan. 1 and 2 for the New Year holidays.

The central bank lowered the yuan’s reference rate by 0.09 percent to 6.1248 a dollar today, the weakest level since Dec. 8. The spot rate was 1.5 percent below the fixing, within the 2 percent daily limit.

In Hong Kong’s offshore market, the yuan gained 0.04 percent to 6.2261 a dollar, according to data compiled by Bloomberg. Twelve-month non-deliverable forwards rose 0.03 percent to 6.3350, trading at a 1.8 percent discount to the spot rate in Shanghai.

China’s factory gate prices probably fell 3.2 percent in December from a year earlier, according to the median estimate in a Bloomberg survey of economists before data due Jan. 9. Consumer prices advanced 1.5 percent last month after increasing 1.4 percent in November, a separate survey showed.