After all, it has the second-largest economy in the world, and it soon will be the largest. The bank typically controls the currency’s movement by permitting trades within a specified range of a reference rate it sets daily.
The Yuan market is stabilizing after a historic week of currency regime shifts and biggest selloffs in two decades. The CNY and CNH trade at different exchange rates.
China’s securities regulator said last Friday that the government would 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 equity markets via state-backed financial institutions. Chinese people, anxious about the economy and seeking investment opportunities overseas, have been pulling money out of the country.
After permitting the forex hover on the us dollar on Tuesday, the yuan tumbled almost 4p c, with the same fall on Wednesday. This meant that its open market operations this week injected a net 150 billion yuan. China’s Shanghai Composite Index added 0.8 percent to 3,987.57.
This explains the surprise of many at the news of the Chinese devaluation. Perhaps the Chinese economy is decelerating even faster than anyone realizes.
He also cited a number of medium-term fundamental factors that should support the yuan in the future, including expectations of 7% annual economic growth, several reductions in interest rates and a recovery in property prices. Signs of trouble are accumulating. This is more evidence that China is doing the right thing and that this intervention is already needed and healthy.
But it also ignited a wave of worry on the Ghanaian domestic front, primarily because, Ghana is an import-dependent country who imports heavily from China. Many believe that any further devaluation could increase uncertainty and turmoil in global currency markets. Then there’s the chance that other countries will adopt copycat devaluations to help their exporters compete with China, thereby igniting a currency war that disrupts worldwide trade. At the same time, as China is getting more weight in the global arena and its currency is getting more popular in worldwide trading, the IMF may eventually include it in the basket to calculate its SDRs.
Finally, the Chinese devaluation complicates the Fed’s decision-making.
The People’s Bank of China had typically pegged the value of the yuan to the dollar.
Overall, real estate should be a net beneficiary of the depreciating yuan if investors are increasingly drawn to the asset class, providing additional pricing support. Britain’s resource and commodity-heavy FTSE 100, however, was 0.2 percent lower.