1st LD-Writethru: China yuan weakens to 8-month low against USD

BEIJING, May 26 (Xinhua) -- The yuan hit an 8-month low against the U.S. dollar on Monday in its central parity, on the expectation of an interest rate increase in the United States.

The value of the yuan retreated 18 basis points to 6.1699 against the dollar, according to the China Foreign Exchange Trading System. This was the fourth consecutive daily decline and set a new low since Sept. 6, 2013.

The U.S. Federal Reserve has begun to discuss options to raise interest rates as the economy improves, according to the latest policy meeting minutes of the Fed's Federal Open Market Committee released last week.

After years of economic recovery, the Fed may start raising the federal funds rate around the third quarter of 2015, predicted Zhu Haibin, chief China economist with J.P. Morgan.

In China's foreign exchange spot market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

The central parity rate of the yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.