China reduce the value of its again against the dollar
China lowered again Wednesday Reference price of the yuan against the dollar, which led to confusion international markets, which considers it a worrying indication about the health of the global economy.
The Chinese central bank sets every day price of the yuan, or “people’s currency” that fluctuates around a margin of 2 percent in both directions.
Chinese central got lower by 1.62% of the national currency exchange rate, so that Pat 6.3306 yuan to the dollar, compared to 6.2298 Tuesday.
The central bank sought Wednesday to allay concerns about the move and said it “Given the economic and financial situation in the world and China, there is no basis for the continuous devaluation of the currency.”
Nevertheless, the Chinese currency fell in the exchange markets, where they were exchanged on Wednesday afternoon at about 6.44 yuan to the dollar, its lowest level since summer 2011.
And this led to the sudden reduction stumbled stock exchanges and raw material prices that China is one of the largest consumers.
This decision is largely a desperate attempt support from the authorities to revive China’s foreign trade after the collapse of exports in July, and fears returned to the Asian giant’s economy.
The weakening of the yuan also increases the cost of China’s imports denominated in other currencies, and may lead to the collapse of demand in the country.
But the central bank is keen not to use the word “devaluation” currency that could pave the “war of currencies” and pointed to “a new way” in the calculation of the basic price.
and its added that the reference to the yuan, which publishes the morning every day the price will reflect from now on exchanges shut down the previous day, supply and demand in the exchange rate markets and fluctuations in major currencies.
Therefore, the reduction of Tuesday was a “solo amendments” will not be repeated in order to adapt to the realities of the currency market, according to China’s central bank.
Julian Evans – Pritchard of the Office of Capital Economics said , “China’s central bank faced a dilemma. If not reduced reference pricing to reflect the decline in the yuan Tuesday in exchanges, he turned out he reneged on promises, depending on market movement.”
Analysts believe that the central bank is seeking through increased currency flexibility to enhance opportunities for inclusion in the reference basket of currencies to the International Monetary Fund, which currently includes the dollar, euro, yen and sterling.
Fund welcomed China’s central bank action, saying it “positive phase”, but stressed it would not affect the decision which will be announced in November.
The United States, which accuses China of fabricating periodically cut the price of its currency to stimulate its trade, seeming cautious in commenting on recent measures, even though it has long called for the liberalization of the yuan.
However, the long decline of the price of the yuan may speed up the flow of capital out of China by investors who fear the collapse of the value of the yuan-denominated assets.
Any decline in the Chinese currency rate automatically boosts prices of raw materials denominated in dollars of Chinese imports, which could affect demand and hurt global markets falter where gold and industrial metals today.
Evans – Pritchard Added that “authorities may intervene thus in the scenes in the coming days, probably by buying currencies” in order to emphasize the need not to expect prolonged decline of the yuan.
The Chinese central bank sets every day price of the yuan, or “people’s currency” that fluctuates around a margin of 2 percent in both directions.
Chinese central got lower by 1.62% of the national currency exchange rate, so that Pat 6.3306 yuan to the dollar, compared to 6.2298 Tuesday.
The central bank sought Wednesday to allay concerns about the move and said it “Given the economic and financial situation in the world and China, there is no basis for the continuous devaluation of the currency.”
Nevertheless, the Chinese currency fell in the exchange markets, where they were exchanged on Wednesday afternoon at about 6.44 yuan to the dollar, its lowest level since summer 2011.
And this led to the sudden reduction stumbled stock exchanges and raw material prices that China is one of the largest consumers.
This decision is largely a desperate attempt support from the authorities to revive China’s foreign trade after the collapse of exports in July, and fears returned to the Asian giant’s economy.
The weakening of the yuan also increases the cost of China’s imports denominated in other currencies, and may lead to the collapse of demand in the country.
But the central bank is keen not to use the word “devaluation” currency that could pave the “war of currencies” and pointed to “a new way” in the calculation of the basic price.
and its added that the reference to the yuan, which publishes the morning every day the price will reflect from now on exchanges shut down the previous day, supply and demand in the exchange rate markets and fluctuations in major currencies.
Therefore, the reduction of Tuesday was a “solo amendments” will not be repeated in order to adapt to the realities of the currency market, according to China’s central bank.
Julian Evans – Pritchard of the Office of Capital Economics said , “China’s central bank faced a dilemma. If not reduced reference pricing to reflect the decline in the yuan Tuesday in exchanges, he turned out he reneged on promises, depending on market movement.”
Analysts believe that the central bank is seeking through increased currency flexibility to enhance opportunities for inclusion in the reference basket of currencies to the International Monetary Fund, which currently includes the dollar, euro, yen and sterling.
Fund welcomed China’s central bank action, saying it “positive phase”, but stressed it would not affect the decision which will be announced in November.
The United States, which accuses China of fabricating periodically cut the price of its currency to stimulate its trade, seeming cautious in commenting on recent measures, even though it has long called for the liberalization of the yuan.
However, the long decline of the price of the yuan may speed up the flow of capital out of China by investors who fear the collapse of the value of the yuan-denominated assets.
Any decline in the Chinese currency rate automatically boosts prices of raw materials denominated in dollars of Chinese imports, which could affect demand and hurt global markets falter where gold and industrial metals today.
Evans – Pritchard Added that “authorities may intervene thus in the scenes in the coming days, probably by buying currencies” in order to emphasize the need not to expect prolonged decline of the yuan.
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