There is no need to panic about the recent weakness in the Chinese currency as the long term outlook is set to improve, economics analysts predicted.
The Chinese currency Renminbi, or the yuan, weakened 33 basis points to 6.3352 against the U.S. dollar last Friday from the previous day, according to the China Foreign Exchange Trading System.
Compared with the highest rate listed in the beginning of November, last Friday's rate showed the yuan's depreciation has reached 0.29 percent.
EXCHANGE RATE MECHANISM MORE FLEXIBLE
"In the middle- and long-term outlook, Renminbi is still on the rise", said Zhang Monan, an economics researcher with China's State Information Center.
Zhang suggested that the current depreciation in yuan may indicate a more flexible, two-way floating exchange rate mechanism is being established rapidly.
To carry on the development, the direct trading of the yuan against the Australian and Canadian dollars was officially started on Nov. 28, bringing the total of foreign currencies that can be directly traded with the Chinese currency to nine.
INFLATION PRESSURE EASES
China's inflation rate went to a 13-month low in November, according to the data released last Friday by the National Bureau of Statistics .
In this situation, China may focus more on stabilizing economic growth instead of appreciating yuan, predicted Edmond Law, the deputy head of foreign exchange at BWC Capital Markets in Hong Kong.
The yuan's depreciation in this stage is mainly influenced by the Eurozone debt crisis and the slow recovery of major economies as it was in the midst of the U.S. financial crisis in December 2008, Zhang Monan commented.
Zhao Qingming, a senior research fellow of the China Construction Bank, pointed out that the pressure to appreciate yuan has changed due to the dampening of the world economic outlook and the deceleration of the export growth in China.