“But in competitive devaluation, one country gains at the expense of the other”. Some members of Congress have backed legislation to impose retaliatory tariffs.
But a later report from the National Association of Home Builders showed US homebuilder sentiment rose in August to its highest level since a matching reading nearly a decade ago.
The daily reference rate that sets the value of the Chinese currency against the greenback was cut by 1.62% to 6.3306 yuan, from 6.2298 on Tuesday, the PBoC said in a statement on its website.
The weighted average of the overnight repurchase agreement rate, a benchmark measure of short-term borrowing costs between commercial banks, is now at 1.72%, up from 1.57% on the eve of the yuan’s devaluation. The Chinese authorities most likely welcome an adjustment of the currency as the yuan has risen in real terms by 18 percent against the dollar in the last two years and growth has slowed. The dollar traded at 124.47 yen, up slightly from late U.S. levels.
Mr Lo argued that Beijing will resist further devaluation because it would not significantly help the country’s export sector. Because of the rising value of the dollar, American industrial companies have lost a huge percentage of the export pie.
US crude futures fell 0.8 percent to $41.49, within 15 cents of making a new six and a half year low.
“We expect damage from the financial market volatility triggered by the exchange rate reform to dent third-quarter GDP growth”.
A weaker yuan might prompt complaints by foreign manufacturers.
China’s securities regulator said last Friday that the government will allow market forces to play a bigger role in determining stock prices, the first official signal from Beijing that it could be moderating its efforts to prop up its equity markets via state-backed financial institutions.
The recent 4.4 percent devaluation of the Yuan by the Chinese central bank reignited talk of a global currency war.
He also repeated remarks by senior officials of the People’s Bank of China that the central bank had basically withdrawn from “routine” intervention in the foreign exchange market, and would only step in under special circumstances where the market rate had moved away from fundamentals. It said a strong yuan is “not entirely consistent with market expectation” and this was a good time to adjust controls. Until recently, the Bank would ignore the previous day’s trading when setting the new day’s price fix.
For them, a weaker yuan means less revenue when the currency is converted back into U.S. dollars.
The yuan is likely to move in both directions as the situation stabilises, PBOC chief executive Massachusetts Jun said, Bloomberg reported. In the spot market, the yuan closed flat at 6.3938.