Chinese yuan today touched a six year low against US dollar as China permitted a gradual devaluation of its currency to boost the value of the sagging export earnings.
The central parity rate of the Chinese currency yuan, weakened 132 basis points to 6.7690 against the US dollar, according to the China Foreign Exchange Trade System.
It was the weakest level since September 2010 as increased market expectations for an interest rate hike in the US led to a stronger dollar.
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 US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day, state-run Xinhua news agency reported.
The recent yuan depreciation can be attributed to a stronger dollar, Wang Chunying, spokesman for the State Administration of Foreign Exchange, had said.
Wang said that China's exchange rate mechanism had become more market-oriented and transparent which led to higher volatility for the yuan.
Despite short-term volatility from a stronger dollar, the yuan will maintain overall stability and the chance for a sharp depreciation is slim, backed by stable economic growth, balanced fiscal condition and ample foreign exchange reserves, the report quoted analysts as saying.
Yuan has been steadily getting devalued since August last year to boost the value of its exports which have been falling due to dwindling global demand.
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