China weakens yuan to 8-year low as US dollar surges

Chinese 100 yuan notes in Beijing.
Chinese 100 yuan notes in Beijing. PHOTO: AFP

SHANGHAI (AFP) - China on Tuesday (Nov 15) weakened the yuan's fix against the US dollar to a nearly eight-year low as the surging dollar put further pressure on the unit.

The central People's Bank of China set the value of the yuan - also known as the renminbi - at 6.8495 to the greenback, down 0.30 per cent from Monday's fixing, according to data from the Foreign Exchange Trade System.

The unit has reached a series of six-year lows in recent weeks in the face of a greenback rising on expectations of sharper US interest rate hikes, with President-elect Donald Trump pledging during his campaign to ramp up spending and cut taxes.

But Tuesday's fix was the weakest since December 2008, and beyond the roughly 6.83 level at which Beijing virtually pegged the unit for nine months in 2009-10.

China only allows the yuan to rise or fall two per cent on either side of the daily fix, one of the ways it maintains control over the currency.

One analyst said Beijing might intervene to keep the unit from dropping further.

"It's a USD story so far - and possible intervention to see us back from the brink," Michael Every, head of Asia-Pacific financial markets research at Rabo Bank, said in a written response to AFP.

The onshore yuan was quoted at 6.8425 on Tuesday morning, down 0.02 per cent from Monday's close of 6.8409, according to the Foreign Exchange Trade System.

In August last year, Beijing suddenly devalued the yuan, causing investors to dump the unit in volumes not seen since 1994 and sparking an outflow of capital from China.