Chinese yuan weakens against US dollar for third day

BEIJING - The central parity rate of the Chinese yuan against the US dollar fell for the third straight day on Wednesday to its lowest level in more than 54 months.

The yuan weakened 31 basis points against the US dollar to 6.4895 on Wednesday, according to the China Foreign Exchange Trading System.

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.

Analysts attributed the fall to a stronger US dollar mainly caused by the interest rate raised by the Federal Reserve on Dec 16.

Analysts said the policy divergence between the Fed and other central banks has driven investment flows into the US and boosted the greenback.

The US dollar gained against other major currencies on Tuesday. The dollar index, which measures the dollar against six major currencies, went up 0.21 percent at 98.123 during late trading on Tuesday.

Despite the pressure on the depreciation of the yuan, there is no basis for continued yuan depreciation, and China is capable of keeping the currency stable at a reasonable level, central bank vice governor Yi Gang said, adding that China's high-medium growth and foreign exchange reserves are major factors underpinning the currency.