1st Ld-Writethru: Chinese yuan weakens to new 8-year low against USD

The Chinese currency, the renminbi or the yuan, continued to depreciate Friday against the U.S. dollar to hit its weakest point since June 2008.

The central parity rate of the Chinese yuan weakened for the third straight trading day by falling 83 basis points to 6.9168 against the U.S. dollar Friday, according to the China Foreign Exchange Trading System.

In the past 15 trading days, the yuan ended down 14 days and rose only once against the U.S. dollar. On Thursday, the Chinese currency dropped below 6.9 against the greenback.

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 U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

Analysts said the particularly strong U.S. dollar is the major reason behind the yuan's continued depreciation this month, and it will continue to influence the yuan's fluctuation as the dollar is expected to keep strengthening amid rising expectations over a U.S interest rate hike in December and upbeat economic data in the country.

A number of Federal Reserve policymakers said a rate hike could be appropriate "relatively soon" if the economic data permits, according to minutes from the Federal Reserve's November meeting released Wednesday.

Rising domestic demand has also added pressure on the yuan's depreciation.

A China Merchants Securities report said that the yuan will continue to face depreciation pressure next quarter as Chinese citizens tend to increase purchases of foreign currencies, especially U.S. dollars, at the end of the year as they plan for overseas travel during the upcoming Spring Festival holiday.

However, experts noted that compared with the firming U.S. dollar, the Chinese yuan was relatively stable, and even stronger against other currencies.

The dollar index has surged around 5 percent since it started its appreciation trend on Nov. 7. Meanwhile, the Chinese yuan fell less than 2.5 percent against the dollar.

In the same period, the euro zone and Japan saw their currencies weaken by more than 5 percent and nearly 10 percent, respectively, against the dollar, according to Wind Data.

Experts said that with China's abundant foreign reserves and policy tools, the yuan is not likely to depreciate against the dollar in a disorderly way. In the mid and long term, the depreciation will not persist. Endi