Published: Thu, November 17, 2016
Economy | By Melissa Porter

Yuan Slides to Lowest Level in Nearly Eight Years

HONG KONG China's yuan weakened to an eight-year low on Wednesday as expectations of higher US interest rates buoyed the dollar, putting Beijing's commitment to market-oriented reforms in the spotlight as fierce critic Donald Trump prepares to take office.

The value of one dollar rose as high as 6.87 yuan, its highest point since December 9, 2008. The yuan has hit a series of six-year lows in recent weeks in the face of the dollar rising on expectations of higher U.S. interest rates. But they also said that the forex rate volatility is not unusual during the currency's internationalization, and compared to the currency basket that includes the US dollar, Japanese yen, the euro, and the pound, the yuan's rate remains stable.

The complexity of U.S-China relations, however, likely means that Trump won't push for its most important trading partner to be labelled a currency manipulator in the near-term, owing in part to that country's genuine efforts to allow the yuan to move more freely in global foreign exchange markets.

"We still awaiting what policies are going to be in terms of Trump's policies towards [China] given what he said in the run-up to the election, but it's not a cause of concern at this point in time", Kotech said.

"China's worldwide investment position shows that there is still a lot of capital that could leave", he said in a note.

Baku, Fineko/ The slump of the national currency of China has already become a continuous process, but in reality it has little to do with the weakening of the Chinese economy.

Concerns about capital outflows had been on the rise as the economy slowed, the possibility of a USA rate hike loomed and authorities revamped the forex mechanism a year ago to better reflect market changes.

"Yuan deprecation means more capital outflow and more pressure on China's foreign exchange reserves", Liao Qun, Citic Bank International Chief economist, told AFP.

Offshore yuan traded in Hong Kong weakened for a third consecutive day, down 0.11 per cent, or 74 basis points, to 6.8785 as of 10.15am, after earlier slipping to 6.8808, the lowest level since the offshore market was launched in 2010.

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