(Yicai Global) Oct. 13 -- China's central bank weakened the yuan for a sixth day in a row yesterday. It is the currency's longest continuous devaluation since the eight trading sessions that ended on Jan. 7.
The yuan's central parity against the dollar was guided to 6.7258, down 160 points, the China Foreign Exchange Trade System said. The People's Bank of China allows the yuan to move 2 percent either way from the rate it sets daily. On Oct. 10, it fell to its lowest since September 2010.
Market participants expect the yuan to remain weak, but only a limited devaluation is anticipated. China's economy relies on manufacturing and more emphasis is being placed on exports amid slower growth. For the moment, a weaker yuan helps. The PBOC also has less reason to maintain a stronger currency after better economic data helped curb capital outflows.
Fluctuations in the yuan are nothing out of the ordinary, according to Mr. Zhao Yayun, an analyst at Analysys International.
The yuan's decline follows its inclusion on Oct. 1 into the International Monetary Fund's basket of reserve currencies, know as Special Drawing Rights (SDRs).
In the short term, the yuan's exchange rate will still depend on the dollar's performance against other currencies, and will be dictated therefore by market expectations and the actual pace of the US Federal Reserve Bank's rate hike, UBS Securities said in a recent note.
The PBOC is expected to pay more attention to the CFETS RBM currency basket it introduced in August last year, and will allow the yuan to weaken moderately against the US dollar. But the yuan-dollar exchange rate is unlikely to breach the 6.8 level.
As of yesterday, the yuan was worth EUR7.4366, JPY100 equaled CNY6.5096, one Hong Kong dollar was worth CNY0.86688, while the UK pound was at CNY8.2479.