Chinese yuan weakens further against USD
Beijing, Dec 16 (IANS) Chinese yuan weakened against the US dollar on Friday for the third-straight day Friday after the U.S. Federal Reserve (Fed) raised the benchmark interest rate for the first time this year, Xinhua news agency reported.
Yuan, which recently become one of the five global reserve currencies, dropped to an 8-year low against the US dollar on Thursday.
The yuan has steadily weakened against the US dollar since the start of the year, sending shock waves through currency markets. Financial experts have weighed in to point out that the depreciation is, in essence, a self-correction, and the yuan will continue to remain stable.
The central parity rate of the Chinese currency weakened 219 basis points to 6.9508 against the US dollar Friday, according to the China Foreign Exchange Trading System.
The Federal Reserve Wednesday raised the benchmark interest rate by 25 basis points, the first and only time in 2016, and hinted there would be three increases in 2017, more than investors were positioned for.
Analysts have said that with a rate-hike largely priced in before Wednesday, the greenback was supported by the speculation of more rate-hikes next year.
Looking ahead, the yuan may come under short-term pressure but have limited room for further weakening, analysts agreed.
They also ruled out the possibility of substantial depreciation in the longer term as China continues to witness steady economic growth, progress in economic restructuring and a stable financial market.
In China’s spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.