Yuan devalued again; China’s lack of communication confuses markets

By FXStreet FXStreet (Mumbai) – The People’s Bank of China (PBOC) today once again guided the yuan lower, setting the official midpoint rate on the yuan at 6.5646 per dollar, the lowest since March 2011. Following the central bank’s decision to allow the currency a free flow, yuan plunged to a record low of 6.7511 against the dollar before recovering to 6.6910 on suspected intervention. The onshore yuan rate also fell to 6.5941, touching a five-year low and was at 6.5920 in late trading. The PBOC’s China Foreign Exchange Trade System (CFETS) stressed that there was really no basis for yuan’s depreciation.

Today’s devaluation resulted in suspension of the stock market for the second time this week. The ‘circuit breaker’ mechanism also had to be brought in on Monday when the CSI 300 Index recoded a 7 per cent sell off. PBoC’s fixing today has caused both regional currencies and stock markets to tumble. Investors worry that lowering the yuan would lead to devaluation of currencies by China’s trading partners as yuan devaluation will pressurize other Asian countries to lower the value of their currencies in order to stay competitive. Highlighting the market fear Sim Moh Siong, FX strategist for Bank of Singapore, …read more

Source:: FX Street