Chinese currency dips to the lowest in a decade against dollar

The Chinese currency yuan sank past 6.97 against the US dollar on Tuesday morning, hitting 6.9717, the weakest since 2008, stirring speculation over whether the key level of 7 yuan per dollar will be broken.

It came after the People’s Bank of China (PBC), the central bank, weakened the daily reference rate, which restricts the onshore yuan’s moves by 2 percent on either side, to the lowest level since May 2008.

The official yuan midpoint was fixed at 6.9574 per dollar on Tuesday, 197 pips, or 0.28 percent, weaker than the previous fix of 6.9377, according to the State Administration of Foreign Exchange.

The onshore yuan exchange rate against the green back ended at 6.9613 at Tuesday’s official close, 53 pips lower than the previous closing.

Liu Xuezhi, a senior macroeconomics expert at the Bank of Communications, told the Global Times on Tuesday that there is a possibility that the psychological barrier of 7 yuan per dollar will be unlocked given the current changes due to a complex of factors, but the possible result does not equal to a huge, negative impact on the market.

“If it reaches the this level, the market may return with a reasonable attitude toward exchange rate fluctuations,” said Liu.

Since the middle of June this year, the Chinese currency has slumped against the green back by over 8 percent.