China sets yuan rate at four-year low against dollar

China sets yuan rate at four-year low against dollar

China's central bank today set its daily reference rate for the yuan currency at a four-year low against the US dollar, but it closed stronger than the previous day.

The yuan was fixed at 6.4085 to the greenback, according to the China Foreign Exchange Trade System, just 0.07 per cent weaker from the previous day. But it was the lowest since August 2011, the Shanghai Securities News said on its website.

The yuan still ended the day at 6.4053 to the dollar, up from both yesterday's close of 6.4095 and the reference rate, also known as central parity.

The lower fixing followed an interest rate cut announced on Tuesday.

The central bank on August 11 devalued the yuan by nearly two per cent, saying the decision was aimed at moving towards a more flexible exchange rate though the market interpreted it as a sign of economic weakness. It fell further in the following days.

The yuan is restricted to trading up or down two per cent from the daily rate on the national foreign exchange market.

Before the August 11 change, the central bank used to decide its daily yuan reference rate by polling market-makers, but now says it takes into consideration the previous day's close, foreign exchange supply and demand, and the rates of major currencies.

The central bank injected 150 billion yuan (USD 23 billion) into the money market today, according to a statement, amid recent tight liquidity. 

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