Chinese yuan at 8-year low after US Fed raises key interest rate
China's currency renminbi today fell to an eight-year low against the US dollar over fears of capital outflows and the communist giant's main stock exchange closed lower after the US Federal Reserve's move to raise the benchmark interest rate for the first time this year.
Beijing: China's currency renminbi today fell to an eight-year low against the US dollar over fears of capital outflows and the communist giant's main stock exchange closed lower after the US Federal Reserve's move to raise the benchmark interest rate for the first time this year.
The central parity rate of the renminbi, or yuan, weakened 261 basis points to 6.9289 against the US dollar today, according to the China Foreign Exchange Trading System.
The Federal Reserve yesterday raised the benchmark interest rate by 25 basis points, the first and only time in 2016, and indicated a faster rate hike pace next year.
The Fed's updated economic projections indicated that the central bank expects to raise rates three times next year, compared to the two-time suggestion in its September projections.
Analysts said that with a rate-hike largely priced in before yesterday, the greenback was supported by speculations of more rate-hikes next year.
Dragged down by poor performance of heavyweights, the benchmark Shanghai Composite Index was down 0.73 percent to close at 3,117.68 points.
The smaller Shenzhen index closed 0.23 percent higher at 10,256.11 points.
The ChiNext Index, which tracks China's NASDAQ-style enterprises, gained 0.65 percent to close at 1,975.85 points.
Banking shares slumped, triggered by panic selling in bond markets that raised fears of a liquidity crisis.
The Bank of Nanjing fell 5.38 percent to end the day at 11.07 yuan per share, while the Bank of Communications closed 4.27 percent lower at 5.83 yuan, state-run Xinhua news agency reported.
However, China's National Bureau of Statistics (NBS) had earlier this week said as the Chinese economy maintains medium-high growth, the renminbi has the conditions to remain basically stable.
Judging from the nation's economic fundamentals, the economy will maintain medium-high growth with a trade surplus and abundant foreign reserves, Mao Shengyong, spokesperson for the NBS, had told media.
Other factors, such as the Belt and Road Initiative and the yuan's inclusion in the IMF Special Drawing Right (SDR) currency basket will also increase global demand for renminbi assets, Xinhua quoted Mao as saying.
In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.