The yuan depreciated against a basket of currencies in June, according to an index released by financial services provider China Foreign Exchange Trade System (CFETS).
The yuan exchange rate composite index, which measures the yuan's strength relative to a basket of currencies including the U.S. dollar, euro and Japanese yen, came in at 95.02 at the end of June. That marked a 2.19 percent depreciation from 97.15 a month earlier, CFETS said in an article published on its website Friday.
Market analysts attributed the yuan's recent weakening to the new mechanism that China moved to make the yuan's value more market-based by referencing it to a basket of currencies instead of the dollar alone.
The market was spooked, setting off a downward adjustment of the yuan. As communication between the central bank and the market becomes more effective, the mood will stabilize.
The Chinese authority reaffirmed that the yuan's devaluation is not in its interests, as it could disrupt China's economic rebalancing efforts.
China's economy is faced with mounting downward pressure. However, with structural reform well underway and rebalancing efforts working out, China's economic fundamentals remain sound. That rules out substantial depreciation of the yuan, thus, supports the long-term stability of the currency.
The composite index was first released in December 2015 to offer a more comprehensive reflection of exchange-rate changes. Previously, market watchers had mainly fixated on the yuan-U.S. dollar rate.
In June, the index that measures the yuan against the Bank for International Settlements (BIS) currency basket weakened to 96.09 from 98.44 at the end of May, while that against the Special Drawing Rights (SDR) basket weakened to 95.76 from 96.21, according to the CFETS.
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