China's continuous economic slowdown and the recovery of the US economy will cause the Chinese currency, the yuan, to depreciate by about 2 percent this year, researchers said.

The lagging economic recoveries of many other countries will also trigger the yuan's depreciation against the dollar this year, said an annual exchange-rate report by Chen Xuebin and Li Huajian, researchers at the Institute for Financial Studies at Fudan University.

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"With robust economic growth, strong expectations of rising interest rates and lagging economic recoveries in many other countries, the US dollar will further strengthen and appreciate against the yuan," the report said

According to the annual exchange rate report released by the researchers in Shanghai, the yen could also further weaken as Japan is expected to keep its low interest rates and easing policies.

The report also said China's currency policy does not match the demands of the real economy and of the country as a whole. That means the liquidity has not trickled to the real economy from the interbank market.

"Instead, the liquidity entered the stock market," the report underscored.

Market insiders, however, predict that the internationalization of the yuan may take a big leap this year special that the currency has a chance of being included in the International Monetary Fund's Special Drawing Rights (SDR) reserve asset.

A growing number of investors are closely monitoring the prospects of the yuan being included in the SDR.

An economist at DBS Bank Ltd said many investors are now keen to invest in the yuan but are still waiting for the currency to be included in the SDR.

Yuan's inclusion in the SDR will help accelerate China's financial market reform," the economist said.

Recently, the People's Bank of China, the country's central bank, had given permission to the Bank of China and the Industrial and Commercial Bank of China to launch yuan clearing businesses in Malaysia and Thailand, respectively.

Yuan clearing businesses have already been established in Hong Kong, Macao, Singapore, London, Frankfurt, Seoul, Paris, Luxembourg, Doha, Toronto and Sydney.

Tagsyuan, Yuan Depreciation