(Yicai Global) July 12 -- The yuan's central parity against the US dollar saw the biggest fall (492 points) in 18 months today, and the exchange rate dropped below 6.7 on both the offshore and onshore markets.

The parity rate came in at 6.6726, tracking lower from the 6.6234 median figure yesterday, China's central bank the People's Bank of China reported, noting that it is the largest slump in the Chinese currency since Jan. 9 last year.

The yuan dropped below the 6.7 mark -- for the second time this month -- shortly after the onshore market opened today, hitting a new low since July 3. It traded at 6.7035 versus the greenback at 9.32 a.m., as against 6.6674 and 6.6749 at the close of the day and overnight sessions on the day before.

The offshore yuan stood at 6.7206, edging up from a low of 6.7296 two hours earlier.

The yuan's devaluation is attributable to two main factors: the rise in the dollar index and marginal fluctuations in foreign exchange supply and demand stemming from changes in global investors' behavior on capital markets, China Merchants Securities explained in its latest research report. Market sentiment also catalyzed these excessive corrections of the yuan exchange rate, it concluded.

Benedict Armour