Chinese yuan at 8-year low after US Fed raises key interest rate

BEIJING: China’s currency renminbi on Thursday fell to an eight-year low against the US dollar over fears of capital outflows and the communist giant’s main stock exchange closed lower after the US Federal Reserve‘s move to raise the benchmark interest rate for the first time this year.

The central parity rate of the renminbi, or yuan, weakened 261 basis points to 6.9289 against the US dollar on Thursday, according to the China Foreign Exchange Trading System.

The Federal Reserve on Wednesday raised the benchmark interest rate by 25 basis points, the first and only time in 2016, and indicated a faster rate hike pace next year.

The Fed’s updated economic projections indicated that the central bank expects to raise rates three times next year, compared to the two-time suggestion in its September projections.

Analysts said that with a rate-hike largely priced in before yesterday, the greenback was supported by speculations of more rate-hikes next year.

Dragged down by poor performance of heavyweights, the benchmark Shanghai Composite Index was down 0.73 per cent to close at 3,117.68 points.

The smaller Shenzhen index closed 0.23 per cent higher at 10,256.11 points.

The ChiNext Index, which tracks China’s NASDAQ-style enterprises, gained 0.65 per cent to close at 1,975.85 points.

Banking shares slumped, triggered by panic selling in bond markets that raised fears of a liquidity crisis.

The Bank of Nanjing fell 5.38 per cent to end the day at 11.07 yuan per share, while the Bank of Communications closed 4.27 per cent lower at 5.83 yuan, state-run Xinhua news agency reported.

However, China’s National Bureau of Statistics (NBS) had earlier this week said as the Chinese economy maintains medium-high growth, the renminbi has the conditions to remain basically stable.

Source: http://timesofindia.indiatimes.com/business/international-business/chinese-yuan-at-8-year-low-after-us-fed-raises-key-interest-rate/articleshow/56001583.cms