CHINA’S yuan fell sharply in value against the U.S. dollar in offshore trading Friday, as investors speculated the Chinese central bank could widen the currency’s daily trading band as early as the weekend, paving the way for it to depreciate further.

    In New York trading, the price for the offshore yuan fell to 6.2887 per dollar, 2.5 percent lower than Friday’s official midday fixing in China by the central bank at 6.1370 per dollar.

    The Chinese currency has two different exchange rates depending on whether it is traded on the Chinese mainland or offshore. Traders watch the offshore rate because it is more open to foreign investors.

    When the offshore rate trades below the mainland rate, it is typically an indication of weaker overseas demand for the currency. It can also be a sign investors believe the Chinese Government will lower the official exchange rate.

    The People’s Bank of China sets a daily reference rate for the yuan, then allows it to trade 2 percent above or below that level.

    The speculation surrounding the yuan is the latest evidence of mounting pressure on global currencies exerted by the strengthening U.S. dollar. Central banks globally have also raced to lower interest rates and weaken their currencies in a bid to counter waning economic growth.

    On Friday, Russia’s central bank unexpectedly cut its main interest rate, causing the ruble to fall. A day earlier, the Danish central bank trimmed rates into negative territory as pressure has mounted on the currency’s peg to the euro.

    Friday’s trading put the offshore yuan below the China’s central bank’s daily trading band, meaning investors expect the central bank to continue a recent trend of nudging the yuan lower against the dollar.

    A weaker currency helps a country’s exporters and potentially boosts economic growth. However, China is worried about the potential for investors to pull cash out of the country as growth slows, a move that would be accelerated by a sharp decline in the yuan. (SD-Agencies)