China's yuan eased further against the US dollar on Friday as some investors, disappointed at a US Treasury Department report that stopped short of naming China as a currency manipulator, sold their holdings.
However, dealers mostly believed the slide would be temporary and said the currency was still set to breach the key 8.0000 level in the coming weeks.
The yuan closed at 8.0061 to the dollar, down from Thursday's 8.0041 after China's central bank set the Friday mid-point, a reference rate, at a weaker 8.0082 from 8.0062.
The US Treasury on Wednesday failed to name China as a currency manipulator in its semi-annual report on the global economy, a move which disappointed some investors.
Though the US Treasury said it would keep up pressure on Beijing to improve flexibility, some investors were seen selling the yuan in recent sessions after the currency had strengthened in the first three days of the week.
"Some investors are not very patient and they were disappointed at the result, so they sold some of the yuan in their portfolios," said a forex dealer at a European Bank.
The US decision is regarded as a concession, and China is expected to respond with some sort of goodwill gesture to allow the yuan to rise in coming weeks, dealers said.
China's Foreign Ministry spokesman Liu Jianchao told reporters on Thursday that Beijing would continue to improve its currency regime and provide for greater flexibility in the yuan.
Dealers in Shanghai mostly expected the yuan to break through the key 8.0000 level before the end of next week and they also retained their expectations that the yuan was likely to rise 3 percent in 2006. "Next week will be a key week and the trend will mostly depend on market sentiment and political pressure," said another dealer at a domestic bank in Shanghai.
The yuan has appreciated a further 1.3 percent since it was revalued by 2.1 percent to 8.11 per dollar in July 2005, and freed from a dollar peg to float within managed bands.