Recording its longest losing streak for the eighth session, Chinese currency Yuan dropped to four-year low against the US dollar. The China's central bank said Yuan shouldn't be measured only against the US dollar. Yuan was trading weaker the most since July 2011

However, Yuan recovered 3.9 percent against the US dollar this year so far. Though it's trading at six-year low against the US dollar, Yuan advanced against 11 of 16 major currencies. Chinese central bank has reduced reference rate by 0.21 percent.

Yuan fell 0.06 percent to 6.4591 a dollar in Shanghai. The central bank in a statement noted that Yuan is being interpreted as a sign of further declines. Yuan movements should be measured by its fluctuations against other major currencies. 

According to a report by Bloomberg, the China Foreign Exchange Trade System, which is run by People's Bank of China (PBOC), has published a new Yuan index comprising 13 currencies. The US dollar has weightage of 26.4 percent in the Yuan index composition. 

The US dollar rise may slow down after the US Federal Reserve meeting. A possible rebound in offshore Yuan may be a Christmas surprise for the Chinese market, said a strategist at Morgan Stanley in latest report. The offshore Yuan is witnessing one-sided market position on short deals. 

Yuan suffered losses for eight out of 10 sessions indicating longest run of losses since June. The surge in capital outflows has been the main drag on currency value against the US dollar, reports another story by Bloomberg.

There's also market speculation that Chinese central bank is purposefully keeping currency lower to help economy growing, which is at slowest pace in 25 years. 

The Bloomberg's tracking reveals that Chinese Yuan rose against 11 of 16 major currencies. The central bank has reduced reference rate by 0.21 percent to a four-year low of 6.4495. This keeps tabs on fluctuations up to two percent on either side. It's already 10 trading sessions since Yuan has been inducted into IMF's currency basket on 30 November.

The exchange rate indicates the strength of a country's foreign trade and investment with several countries. According to a report by Taipei Times, the one-month implied volatility on the onshore Yuan rose by 71 basis points to 6.75 percent, This is the highest level since August. The implied volatility indicates expected price swings.

Analyzing the central bank's decision on reduction in reference rate by 0.21 percent, Tommy Ong, Managing Director for treasury and markets at DBS Hong Kong Ltd, said: "The latest move suggests the PBOC will allow weaker Yuan fixings. The Yuan is also under pressure as the US is likely to hike rates this week."