1st LD-Writethru: Chinese yuan weakens to 6.8898 against USD Monday

The central parity rate of the Chinese yuan weakened 79 basis points to 6.8898 against the U.S. dollar Monday, according to the China Foreign Exchange Trade System.

UBS economist Wang Tao said that yuan volatility since the new year was mainly caused by the pullback of the U.S. dollar.

U.S. President Donald Trump's plans to unveil comprehensive tax reforms in the next few weeks to lower the overall tax burden, boosted U.S. stock prices and sent the dollar higher against a basket of currencies.

Meanwhile, U.S. jobless claims fell to near a 43-year low and wholesale inventories rose for a second straight month, suggesting improved confidence in the economy.

Economists believe the yuan is seeing less depreciation pressure in the long run and will remain generally stable in the short term due to lingering uncertainties on the U.S. dollar and policies from the Trump administration.

China's improving economy will help the yuan as fundamentals are always the most important factor in currency movements though they take time to take effect.

Consumption in China has grown strongly in the first few weeks of 2017 as people spent more on shopping, dining, travelling and movies.

The manufacturing sector also expanded. The manufacturing purchasing managers' index (PMI) came in at 51.3 in January, staying in expansionary territory for the sixth month.

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. Endi