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Yuan falls as rate set at lowest since 2011
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THE yuan yesterday weakened for the 10th day against the US dollar as China’s central bank set the official reference rate at the lowest since 2011 following the US interest rate hike.
The yuan fell 0.16 percent to close at 6.4837 against the US dollar in Shanghai. It is the second time since November that the yuan has been weakening for 10 straight days.
The People’s Bank of China yesterday set its official central parity rate at 6.4757 per dollar prior to the market open, its weakest since June 2011, and 0.2 percent lower than the previous fix of 6.4626.
The yuan’s sharp fall reflects the dollar’s strength in global markets after the US Federal Reserve raised its policy interest rate by 0.25 percentage points on Wednesday.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major currencies, has been rising for six straight days.
Goldman Sachs and the Royal Bank of Scotland said the greenback is set to remain strong as the US is still likely to raise interest rates by two or three times next year.
CITIC Securities Co said in a note that the PBOC is set to keep the yuan stable against a basket currencies and seek a gradual depreciation against the dollar after the Fed move.
But the depreciation could aggravate capital outflow and the PBOC may further cut banks’ reserve requirements to keep sufficient liquidity by the year end, the brokerage said.
Data from China’s foreign exchange regulator showed commercial banks sold a net US$54.8 billion of foreign exchange in November, up from US$20.1 billion in October.
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