The central parity rate of the Chinese yuan continued to weaken on Monday, hitting a six-year low against the US dollar. The central parity rate weakened by 222 basis points to 6.7379 against the dollar, Xinhua news agency cited China Foreign Exchange Trade System (CFETS) as saying.
It was the lowest level since September 2010. In China’s spot foreign exchange market, the yuan is allowed to rise or fall by two per cent from the central parity rate each trading day.
The central parity rate of the yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
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The weakness in the yuan is a reflection of the dollar’s strength. The US dollar index, which measures the greenback against six major currencies, hit a seven-month high early on Monday following positive economic data from the country.
The yuan has now weakened against the dollar for nine trading days in a row, aside from a strengthening on Friday, as increased market expectations for an interest rate hike in the US have led to a stronger dollar.
In a commentary published last week on the CFETS website, which is run by the People’s Bank of China, the central bank said: “There is no basis for the yuan to depreciate in the long term.” It cited China’s long-term current account surplus, abundant forex reserves, sound fiscal conditions and healthy financial system.
It is normal for the yuan to fluctuate against the dollar, and it will continue to do so, the commentary said.