The Chinese yuan lost more ground against the US dollar Wednesday even though China's central bank set a midpoint rate higher versus previous trading sessions.
The Yuan continued its weak performance against the dollar on Wednesday.
The central parity rate of the Chinese currency was at 6.1282 yuan against the US dollar on Wednesday, 82 basis points higher than in the previous session. But the spot market saw a decline of more than 1.95 percent, close to the two percent trading band set by the central bank.
Chinese authorities widened the yuan's daily trading band to two percent last year. Wednesday's downward trend sustained the yuan's weakness as it lost 1.95 percent against the US dollar during the previous session.
The declining yuan would make many online shoppers turn elsewhere. Chinese consumers have been getting more exposure to US brands, mainly via the Internet. The shoppers say that it is time to pay more attention to European and even South Korean e-commerce websites.
Chinese exports may get a boost because of the sliding yuan. Many companies have been doing yuan settlements to gain more benefits. Exporters say that a cheaper yuan would make their products more competitive.
Financial markets are relatively calm. Export-related sectors such as clothing, textiles, and home appliances have not seen significant rallies. Experts say the yuan's trend will be short-lived but real estate may be pressured should the currency decline continue.
Some analysts say the yuan will experience more volatility this year but won't see any large-scale depreciation. Other analysts say the foreign exchange rate is consistently bloated and that could harm China's growth.