Chinese yuan weakens to lowest level in 8 years

Beijing, Nov 18 (IANS) The Chinese yuan fell for an 11th consecutive day on Friday to its lowest level in eight years.

The central parity rate of the yuan weakened 104 basis points to 6.8796 against the US dollar, according to the China Foreign Exchange Trading System.

China may allow slightly more yuan depreciation ahead of December’s expected Fed rate hike and likely greater currency pressure from the new US government next year, Xinhua news agency reported.

Li Daokui, an economics professor at Tsinghua University, forecast that the yuan will likely weaken by 3-5 per cent in 2017 against the dollar.

Despite recent declines, analysts ruled out the possibility of sustained yuan depreciation in the long term, as the country’s economic fundamentals remain solid and it continues to witness progress in economic restructuring.

Official data showed that China’s GDP expanded by 6.7 per cent year on year in the third quarter, unchanged from the first two quarters.

China’s economy is expected to grow steadily in the fourth quarter, said Mao Shengyong, spokesperson for the National Bureau of Statistics.

In China’s spot foreign exchange market, the yuan is allowed to rise or fall by 2 per cent 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.