Investing.com - The Chinese yuan fell against the dollar for a third day on Wednesday, dropping to its weakest level in eight months, after China doubled the currency’s trading band over the weekend.
USD/CNY hit highs of 6.20, the strongest level since July 17, 2013, and was last trading at 6.19.
On Saturday, the People's Bank of China said it would let the currency move up or down by 2% from the central parity rate, a level it sets each day. Previously, the currency was allowed to rise or fall by 1% from this rate.
The central parity rate of the yuan is determined by a weighted average of prices before the market open each day.
The PBOC pledged to allow market forces to play a greater role in setting the yuan's exchange rate as it widened the band, but said it would still implement "necessary adjustments" to prevent any abnormal fluctuations in the currency.
The currency has fallen 0.65% against the dollar since the trading band was widened.
Some investors have viewed the decision as an indication that the central bank may want to shore up growth in the sluggish economy by effectively easing monetary conditions.
Recent data showed that Chinese exports fell 18.1% on a year-over-year basis in February, while the annual rate of inflation slowed. Investors were also on edge after China’s first domestic bond default added to concerns over the health of the country’s financial sector.
Other investors have taken the view that the move is designed to ward off speculators betting on the currency's continued appreciation.
The yuan has risen more than 30% against the dollar since a decade-long dollar peg ended in July 2005. The yuan rose to a record 6.04 to the dollar in January this year.