China's Yuan Falls Sharply to Near 8-Year Low against US Dollar

China's yuan fell sharply to a near eight-year low against the US dollar Tuesday. The central parity rate of the yuan weakened 204 basis points to 6.8495 against the dollar, according to the China Foreign Exchange Trading System (CFETS). 

    This is the eighth-consecutive day that the yuan's central parity rate has fallen, (Xinhua) news agency reported.

    Facing uncertainty in US-China trade, it is possible that China may take the opportunity to release the pressure in advance, allowing the yuan to weaken somewhat as the dollar rises, said Huili Chang, analyst at China International Capital Corp.

    Although the yuan was weaker against the dollar, it remained stable relative to a basket of currencies. This is in sharp contrast to the situation in early January, when the yuan declined against both the dollar and the basket, Chang added. Looking ahead, the yuan may come under short-term pressure but have limited room for further weakness in the medium term. 

    Chang also ruled out the possibility of substantial depreciation in the longer term, and maintained the forecast of 6.98 for end-2017. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% 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.