China's central bank on Wednesday fixed the yuan currency nearly 0.60 per cent weaker against the US dollar, the biggest downward move since devaluing the unit in August last year. The People's Bank of China set the value of the yuan, also known at the renminbi (RMB), at 6.4943 to US$1.0, weakening 0.59 per cent from the fix of 6.4565 the previous day. The offshore yuan in Hong Kong depreciated 0.04 per cent to 6.5054.

One of the ways China maintains control over its currency is by allowing the yuan to rise or fall no more than two percent on either side of the daily fix.

Decline In Line with Strong Dollar

Analysts said the weaker fix was in line with strength in the US dollar overnight. Some traders, however, are concerned that the fixing still lags behind its trade-weighted basket, and that the Chinese authority seems to have adopted an opportunistic approach to manage its currency of late.

According to strategists from Brown Brothers Harriman, “It seems that when the US dollar is soft, the PBOC tracks the dollar more than the trade-weighted index (TWI). Some officials think this protects China in case the US was seeking to devalue the dollar for competitive purposes. On the other hand, when the dollar is strong, the PBOC appears to track the TWI closer than the greenback. This may protect it from claims of competitive depreciation.”

Meanwhile, the dollar rose against most of its peers Tuesday as global growth worries swept equity markets and pushed oil prices lower, boosting demand for the safe-haven US currency. The New Zealand Kiwi fell to 68.85 US cents at 5pm in Wellington, from 69.81 cents late yesterday dropping from 4.5172 yuan to 4.4743.