| The anxiety level about a fresh round of worldwide currency skirmishes just went up by a notch. The trigger this time is a surprise, near-2 percent devaluation of the Chinese yuan against the U.S. dollar. The People’s Bank of China downplayed the move as a “one-time correction” and a shift to make the currency’s value more sensitive to supply and demand.
But the mainland’s deflating economy raises the risk of a more sustained campaign of yuan debasement, followed by tit-for-tat moves by other countries. As a one-off, the 1.8 percent depreciation in the PBOC’s daily fixing rate against the U.S. dollar will do very little to boost the competitiveness of Chinese-made goods – or put exporters in other countries at peril. In inflation-adjusted terms, the yuan has strengthened by 44 percent against its trading partners’ currencies since the end of 2007...............................................Full Article: Source
|