china-yuen
PHOTO:AFP

China has weakened the yuan’s reference rate against the dollar for the sixth straight trading day.

This is the longest sequence in nine months. And it is coming after expectations of a US interest rate hike put upward pressure on the dollar.

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A series of positive readings on the US economy, and increasingly upbeat statements from Federal Reserve boss Janet Yellen, have fanned speculation the central bank will lift borrowing costs by the end of the year.

This has sent the dollar rallying against most of its peers, including the yuan.

China’s leadership has repeatedly pledged to liberalise trading in the currency, but still keeps a tight rein on it, only allowing it to rise or fall two percent on either side of a daily fix in national foreign exchange markets.

On Wednesday the People’s Bank of China (PBoC) set the unit’s central rate against the greenback at 6.7258, a new six-year low after it passed the 6.7 mark on Monday.

Yuan’s fall

It was the longest sequence of consecutive reductions since January, according to Bloomberg News, when world markets were roiled by concerns over the state of the Chinese economy and Beijing’s ability to deal with the crisis.

Analysts expect the currency to fall further in the face of dollar strength, slowing growth in the Asian giant, and capital outflows.

The world’s second-largest economy expanded only 6.9 per cent in 2015. That’s the weakest rate in a quarter of a century. And it has slowed further this year.

In August last year, Beijing suddenly devalued the yuan by nearly five per cent over a week, causing investors to dump the currency in volumes not seen since 1994.