Yuan Drops To 4-day Low Against US Dollar

The Chinese yuan reached a 4-day low of 6.3729 against its US counterpart on Friday morning in Asia, a day after the central bank slashed the lending and deposit rates to bolster growth.

The next downside support line is seen around the 6.3795/6.38 area and a move below this level could set its weakest mark in more than 6-months. The dollar-yuan pair closed yesterday at 6.3682, down by more than 30-pips from the day's open.

China unexpectedly cut the benchmark one-year lending rate by 25 bps to 6.31 percent yesterday. This was the first interest rate cut since 2008 and the new rate will be effective from today. The deposit rate was also lowered by 25 bps to 3.25 percent.

The Peoples Bank of China has set today's central parity rate for the dollar-yuan pair at 6.3188, compared to Thursday's daily reference rate of 6.3170. The Chinese central bank sets the central parity rate every morning and allows the currency to fluctuate up to 1 percent from the level.