China Devalues the Yuan!
In an unexpected twist, the People’s Bank of China changed the way it calculates the yuan’s daily midpoint against the greenback, allowing it to depreciate by 2%, with a view to stimulating its trade balance and economy. Before Tuesday, the biggest fluctuation had been of 0.16%. This devaluation occurs after the negative results posted by the Chinese economy, including an 8.3% drop in exports in July. The PBOC said that this change would happen only once in order to adjust the currency’s daily calculation (+ or – 2%) while leaving a greater role for supply and demand. Please note that every morning China administratively establishes a value range for its currency. The impact of a weaker yuan will be felt by its negotiating partners, including Canada, Australia and New Zealand.
As a result, the currencies of these nations are lower this morning. The economic calendar in the U.S. is blank today, whereas in Canada we are awaiting Housing Starts for July at 8:15 a.m., with forecasts for 195,000.
