Chinese currency touched its lowest level in six years against dollar during early Monday morning session.

Yuan crashed through an important psychological threshold before recouping some of the losses. It is believed that state banks did not make any effort to support yuan.

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Earlier this year, state banks had staged substantial intervention when yuan hit 6.7 mark in mid-July.

The decline in the value of yuan has reignited the speculation that the Chinese government may have decided to depreciate the currency again.

The dollar appreciation has also been attributed to the decline in the value of the British pound and high likelihood of interest rate hike in the US by the yearend.

However, according to the China Foreign Exchange Trade System (CFETS) website, the yuan registered strength against many other currencies.

The website also stated that the currency is not likely to depreciate in the long run because of various reasons, such as sound fiscal situation and long-term current account surplus.

The website, which is run by the People's Bank of China, noted as well that the robust financial system and ample forex reserve may also provide protection against persistent depreciation.

The report further shared that yuan's inclusion to Special Drawing Right (SDR) basket, will contribute towards keeping it stable against other currencies by increasing overseas holding of yuan assets.

People's Bank of China is looking at adopting more market oriented approach for managing the value of the currency. China recently reported its forex reserve to be at $3.17 trillion at the end of September, showing third consecutive monthly fall. 

Tagspeople's bank of china, International Monetary Fund, Special Drawing Rights (SDR)