BEIJING—The International Monetary Fund is poised to sharply reduce its long-term forecast of China's current-account surplus, the broadest measure of a nation's trade, which would strengthen Beijing's defense against the U.S. argument that the Chinese currency is "substantially undervalued."

Several individuals informed of the debate said the IMF would significantly lower its long-term current account surplus in the update of its flagship publication, the World Economic Outlook, to be released April 17, from the forecast of more than 7% of gross domestic product in the September WEO. The final number has been the subject of ongoing debate within the fund, reflecting the difficulty of the political and technical issues involved.

A reduction to 5%, which has been discussed, "would markedly weaken the case" that the yuan is undervalued," said Brookings Institution China scholar Eswar Prasad, who is a former senior IMF China official.

Since at least 2009, the IMF has been describing China's currency as "substantially undervalued"—and before that it sought to use the term "fundamentally misaligned," though Beijing blocked that designation. China's government intervenes in the market to keep the currency from rising and thus endangering China's exports. The higher the exchange rate, the more costly a country's exports to foreign customers.

According to individuals closely monitoring the debate within the IMF, the fund isn't likely to issue a new judgment on the yuan in the WEO. That's because the IMF is revamping the way it assesses currencies and the new methodology isn't scheduled to be made public until June. Instead, the IMF is likely to argue, as it has done in the past, that continued appreciation of the yuan would give Chinese consumers a lift and help shift China's growth model so it depends less on exports and investment.