Chinese yuan weakens to six-year low against USD

BEIJING - The central parity rate of the Chinese yuan weakened to a six-year low against the US dollar on Monday.

The central parity rate of the Chinese currency renminbi, or the yuan, weakened 132 basis points to 6.7690 against the US dollar Monday, 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 United States led to a stronger dollar.

In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent 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.

The recent yuan depreciation can be attributed to a stronger dollar, said Wang Chunying, spokesman for the State Administration of Foreign Exchange, said at a press conference on Friday.

Wang said that China's exchange rate mechanism has become more market-oriented and transparent which led to higher volatility for the yuan.

Analysts believed 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.