Yuan suffers its biggest fall on record amid speculation over widening of trading band

The yuan plunged to a 10-month low in its biggest daily fall on record yesterday.

It dropped 0.86 per cent to trade at 6.1808 against the US dollar, even after the People's Bank of China (PBOC) fixed the rate at 6.1214 yesterday morning.

It was the largest intra-day fall since China Foreign Exchange Trade System records started in 2007 and the biggest since the official and market exchange rates were unified in 1994.

The yuan ended the day at 6.1450, having lost 1.4 per cent in February - the biggest-ever monthly drop in the currency, according to Reuters.

Analysts said the fall was a response to speculation that the central bank would widen the yuan's trading band in the next few months.

This would have the effect of allowing greater volatility in the currency at a time when the world's second-largest economy was slowing.

Raymond Yeung, a senior economist at ANZ Bank, said the devaluation of the yuan was guided by the central bank, which had been setting a lower reference rate over the past few weeks.