China's Yuan Weakens to 6.8849 against US Dollar Wednesday

The central parity rate of the Chinese currency the renminbi, or the yuan, weakened 245 basis points to 6.8849 against the US dollar Wednesday, according to China Foreign Exchange Trade System.

    In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% 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. 

    The State Administration of Foreign Exchange (SAFE) said Tuesday that China's forex reserves stood at about 2.99 trillion US dollars last month, down from about 3.01 trillion US dollars in December, the seventh sequential monthly contraction, according to (Xinhua) news agency.

    The SAFE attributed the decline to intervention to maintain equilibrium. In addition, many Chinese travel abroad during the Lunar New Year holiday, which was at the end of January this year, prompting higher demand for foreign exchange.

    The SAFE said it was "normal" for forex reserves to fluctuate in light of the complicated domestic and overseas economic environments.

    The administration predicted that capital would flow in a balanced manner across the border in the near future. "China [will] maintain medium-to-high economic growth, a current account surplus, sound fiscal conditions and a stable financial system -- these factors will continue to support the yuan's position as a stable, strong currency. It will also keep forex reserves at a reasonable and abundant level," it said.