The yuan’s spot exchange rate also remained stable at around 6.4 against the US dollar. On Thursday, it staged a rare news conference, even taking questions on its plans for the currency and financial reforms, in a sign of Beijing’s desire to better manage expectations. He said the fluctuation is normal and should not be worrying. Verbal Supportcentral bank is already trying to contain the fallout of the yuan’s decline.

China has attempted to to quell fears its currency would fall further, saying the yuan is close to market levels following declines that sparked fears of a “currency war” if other governments respond by pushing down their own exchange rates. Lower prices are possible in industries such as clothing and basic toys where worldwide competition is fierce and producers in countries such as China don’t have much power to pass on their higher costs to shoppers.

Shock waves from the devaluation had spread through financial markets, causing stocks and Asian currencies to tumble. “The markets have now digested the prospects of a CNY devaluation and are judging it as not as big of a risk as earlier”. This is a misleading idea and not a good characterisation of the forces driving currency markets, either in the case of China or more generally. The dollar has been strong against a wide range of other currencies – including some of China’s key competitors in Asia, such as South Korea and Indonesia.

Yi described as “nonsense” a report that the PBOC wants to engineer an eventual 10% depreciation of the currency in an effort to help exporters, who play a significant role in the economy but have been suffering from sluggish global demand as well as a stronger currency. Newly-confident traders bid up stocks on China exchanges, and pushed up prices for industrial metals like copper, aluminum and zinc. The devaluation was China’s recognition that its exports were losing competitiveness in the world market and the overall economy was not growing as fast as it should.

The People’s Bank of China insists there is no ground for sustained yuan depreciation, however a third consecutive daily devaluation would suggest otherwise. It could dampen the confidence of investors in holding yuan, which could be a setback in China’s goal of the internationalization of the currency. “Any development in the Chinese market, such as foreign exchange rates, taxes and crackdowns on corruption, are likely to affect their global sales and subsequently their marketing and pricing strategies”, Zhou said. Foreign reporters as well as state-controlled media were invited.

When asked whether China can still meet its year-end goal, Yi Gang, the No. 2 official at the PBOC, said “I’m confident”. In the near term, the credibility of this official announcement will be judged by global investors. “As such, a transparent regulatory framework needs to be developed over time”.