THE yuan weakened to an eight-year low yesterday as expectations of higher U.S. interest rates buoyed the dollar, putting China’s commitment to market-oriented reforms in the spotlight as fierce critic Donald Trump prepares to take office.

    The yuan has now depreciated 5.4 percent against the dollar so far this year, with its descent gathering speed since Trump’s election in the presidential race Nov. 8, which has boosted the greenback against most other global currencies.

    Trump has threatened to label China a currency manipulator on his first day in office and has threatened to slap punitive tariffs on Chinese imports.

    Prior to the market open, the People’s Bank of China set a weaker midpoint for the ninth consecutive day as the dollar stood near an 11-month high against a basket of currencies.

    The central bank set the midpoint at 6.8592 per dollar, weaker than the previous fix of 6.8495.

    In the spot market, the yuan opened at 6.8608 per dollar and was changing hands at 6.8700 at midday, 135 pips away from the previous late session close and 0.16 percent away from the midpoint.

    “We are still waiting for clearer signs of whether the dollar index can stand still above 100 and whether China’s central bank will take action to intervene in the market,” said a trader at a Chinese bank in Shanghai.

    “Our strategy now is to keep our positions low to minimize risk,” the trader said.

    The global dollar index fell to 100.08 from the previous close of 100.23. The offshore yuan traded 0.16 percent weaker than the onshore spot at 6.8807 per dollar by press time yesterday.

    “China’s authorities may have scaled back intervention given the broad-based nature of the dollar gains, a desire to conserve forex reserves and a new focus on effective exchange rate stability [against a basket of currencies rather than against the dollar],” Standard Chartered analysts said in a report yesterday.

    A more substantial effort to contain yuan volatility may only emerge if spot approaches 7 per dollar before year-end, the bank said. (SD-Agencies)