Yuan drops nine straight days against US dollar

(Xinhua)
Updated: 2008-08-08 11:01

BEIJING -- China's currency, the yuan, on Friday fell against the strengthening US dollar for the ninth consecutive day.

The central parity rate of the yuan, or Renminbi (RMB), was 6.8585 yuan to the dollar, according to the China Foreign Exchange Trading System. The reference rate was down 30 basis points from the previous trading day.

Analysts attributed the depreciation of yuan to the stronger dollar after June housing data released on Thursday raised expectations for interest rate hikes by the Federal Reserve within the year.

Last week the yuan registered the biggest weekly loss -- 257 basis points -- since the July 2005 exchange rate reform, which freed the yuan from the peg to the dollar and allowed it to float within managed bands.

Shi Lei, a global financial market analyst with the Bank of China, said the yuan's rapid appreciation in the first half had driven many exporters to bankruptcy by increasing the prices of their products denominated in the dollar, threatening the country's economic growth at large.

To ease the situation, Shi said, slowing RMB appreciation to lower the prices of exports would be an effective measure.

Shi said recent price falls for commodities on international markets had eased external inflationary pressures on China, and so pressure for the appreciation of the yuan was less than in the first half year.

The yuan has appreciated by more than 6.6 percent this year after it appreciated by 6.9 percent against the dollar for the whole of last year.

Many believed this had contributed to checking inflation.

Lu Zhengwei, chief economist with the Industrial Bank, said the foreign exchange rate played the role of a regulating instrument.

On Friday, the Renminbi gained 1,195 basis points against the euro to 10.4616 yuan, and 78 basis points against 100 Japanese yen to 6.2609 yuan.