The China Foreign Exchange Trade System building in Shanghai on August 24. Photo: VCG

 The Chinese yuan fell to 7.10 against the US dollar, hitting a new low since October 31, 2019, data from the China Foreign Exchange System (CFETS) showed.

Experts say the short-term negative effect on the yuan's exchange rate is largely due to the wild fluctuation of the US dollar, and they predicted that China's short-term monetary policy will remain stable.

The onshore renminbi opened at 7.0620 against the dollar on Thursday and then dipped to 7.07769, down about 500 points from the previous trading session.

Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times on Thursday that the short-term impact on the exchange rate was driven by appreciation of the US greenback, as a result of mounting concerns over the global spread of COVID-19.

"Panic over the coronavirus is on the rise in the US. That, together with the recent shock to oil prices which has seriously impacted the US shale gas industry, has given rise to dollar appreciation as many investors seek a safe haven," Tian said.

However, Tian noted that in the short run, the yuan can be expected to remain stable as no major change is likely to occur in China's financial policies. He said special funds to support China's small and medium-sized enterprises can be expected.  

On Monday, China's medium-term lending facility (MLF) remained stable despite the US's move to slash federal rates to near zero in response to the coronavirus pandemic.

"China is not lacking in term of liquidity," Tian said. "For now, I don't see the possibility of any major change in its monetary policy, and the exchange rate is likely to remain stable I in the coming weeks despite other countries' adjustments."