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China's devaluation triggers fears of a new round of currency wars

Wednesday, August 12th 2015 - 15:18 UTC
Full article 17 comments
The “one-off depreciation” triggered the Yuan's biggest fall since 1994, pushing it to its lowest level against the dollar in almost three years. The “one-off depreciation” triggered the Yuan's biggest fall since 1994, pushing it to its lowest level against the dollar in almost three years.
The devaluation followed data that showed China's exports tumbled 8.3% in July, hit by weaker demand from Europe, the United States and Japan The devaluation followed data that showed China's exports tumbled 8.3% in July, hit by weaker demand from Europe, the United States and Japan

China's shock 2% devaluation of the Yuan pushed the dollar higher and raised the prospect of a new round of currency wars, just as Greece reached a new deal to contain its debt crisis. Stocks fell in Asia and Europe as investors worried about the implications of a move designed to support China's slowing economy and exports.

 The stronger dollar hit commodity prices, driving crude oil down after Monday's hefty gains.

Weaker stocks lifted top-rated bonds, with yields on Euro zone debt also falling on the Greek deal, struck nine days before Athens is due to repay 3.2 billion Euros to the European Central Bank.

China's move, which the central bank described as a “one-off depreciation” based on a new way of managing the exchange rate that better reflected market forces, triggered the Yuan's biggest fall since 1994, pushing it to its lowest level against the dollar in almost three years.

The devaluation followed weekend data that showed China's exports tumbled 8.3% in July, hit by weaker demand from Europe, the United States and Japan, and that producer prices were well into their fourth year of deflation.

The Australian dollar, often used as a liquid proxy for the Yuan, fell 1.1% to $0.7324 as the US dollar rose 0.4% against a basket of currencies before paring gains.

In Asia, the Singapore dollar hit a five-year low while the Malaysian ringgit and the Indonesian rupiah hit lows not seen since the Asian financial crisis 17 years ago. The Japanese yen hit a two-month low of 125.08 to the U.S. dollar.

Categories: Economy, International.

Top Comments

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  • yankeeboy

    One off depreciation? Well that was yesterday what about the one today?

    I told everyone here when the idiots in Argentina/Venezuela/Brazil added the Yuan to their “reserves” it would be a race to the bottom on devaluations. The last one to devalue is holding the bag.

    China would have to value 20%+ to spark export growth.
    They may do it
    The charts are scary for them

    Told ya...

    Aug 12th, 2015 - 04:00 pm 0
  • Brasileiro

    The Yuan is the currency world market leader. So we can safely say that the problem is not China, as all currencies are losing value against the dollar, the problem is the United States that are in a real mess. And they have not increased the interest ...

    Continuing at this rate the US will be the first country with a bankrupt banking system and the most valuable currency of all.

    The dollar is a green slime bubble that asphyxia and kill Westerners!

    Aug 12th, 2015 - 04:13 pm 0
  • gordo1

    I wasn't aware that in Brasil there was such an erudite economist as Brasileiro. Or am I mistaken?

    Aug 12th, 2015 - 04:27 pm 0
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