Chinese yuan drops 2.64% in Q1

The biggest surprise in the Chinese financial market in the first quarter--is probably the sharp drop of the yuan dollar rate. The Chinese yuan slumped from 6.0539 to 6.2180 against the US dollar, falling by more than 2.6 percent.

That almost wipes out the yuan's 2.9% appreciation for full year 2013. It was the sharpest and longest slide in the yuan since it unpegged to the US dollar in 2005. Some analysts believe that the depreciation was due to the central bank curbing hot money inflow, and to dispel the belief the yuan can only go up.

The central bank announced in mid March to double the yuan's trading band against the dollar to 2 percent. Going forward, expectations are polarized. A survey from Nomura Securities shows that two thirds of respondents think the yuan will weaken further, while 33 percent believe it will appreciate in the next three months.