Following Tuesday’s “one-off depreciation”, which left the yuan nearly 2 percent weaker against the U.S. dollar, the PBOC has lowered the midpoint rate twice.

The yuan’s spot exchange rate also remained stable at around 6.4 against the U.S. dollar.

“This week it has really been all about China’s move and trying to interpret what its broader impact might be”, said Stephen Freedman, senior investment strategist at UBS Wealth Management.

The People’s Bank of China (PBOC) set the midpoint rate at 6.3975 per dollar prior to market open, firmer than the previous day’s closing quote 6.399.

The threat that a cheaper yuan poses to exports and economic growth in other countries.

At 10.50 am, 30-share benchmark S&P BSE Sensex was at 27,672.55, up 160.29 points, or 0.6 percent over previous close. The U.S. Treasury is likely modeling currency values and, like a military general, has mapped various probability paths, considering different scenarios particularly with regard to China gaining world reserve currency status. Experts say the PBoC acted to prevent the Yuan from falling too rapidly, a outcome that was widely flagged when the PBoC first announced a more market-oriented Yuan just 24 hours earlier.

The US has, in the past, sharply criticized China for keeping the value of the yuan artificially low, thus propping up its exporters at the expense of their US counterparts.

According to a central bank spokesman, China’s real effective exchange rate was relatively high and not in line with market expectations, so that the shift in central parity better reflects the market rate.

The yuan has fallen roughly 3.5% over the past two days following a move by the People’s Bank of China to allow market forces to play a bigger role in currency markets.

In Europe, Germany’s DAX rose 0.7% and France’s CAC-40 climbed 1.1% The FTSE 100 index of leading British shares was flat.

Although a weaker yuan may affect the buying power of Chinese shoppers in the short term, it should have no long-term effect since other non-US currencies are also weakening against the greenback, Sun pointed out.

Emerging markets currencies are expected to weaken further. “The one-time total depreciation of around 3% is largely finished… and is a necessary phase in exchange rate reform”.

Secondly, Indian exports which are already under a huge pressure in major markets of the world, would see further erosion in their competitiveness as the Chinese would become much more aggressive in their desperate moves to shore up their economy.