As Federal Reserve Hikes the Key Interest Rates China’s Central Bank Sets Official Midpoint for Yuan at 4-1/2 Year Low

As Federal Reserve Hikes the Key Interest Rates China’s Central Bank Sets Official Midpoint for Yuan at 4-1/2 Year LowWhen the Federal Reserve increases its key interest rates there is expected to be some volatility seen in the Asian markets, at least it goes for the exchange rates.

China's central bank, the People's Bank of China set its official midpoint rate at 6.4757 a dollar before the market opened on Thursday. That's pegged to its weakest point since June 2011and also weaker by 0.2 percent compared to the earlier level fixed at 6.4626.

The significantly weaker midpoint of yuan mirrors the strength of the dollar in the global markets as the U. S. Federal Reserve raise its key policy interest rate overnight according to some traders.

The analyst's point out the likely implications of the move made by China in the current month moving away from a managed peg to the U. S dollar. Earlier, the yuan moved as the dollar did serving as a "firewall" when a basket of Asian currencies collapsed during the financial crisis in the region in the period between 1997 and 98. That firewall is absent now almost after two decades as the emerging markets prepare for a fresh round of volatility as the aftermath of the U. S central bank starting its cycle of gradually hiking the key interest-rates.

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