| China is the world’s largest consumer of commodities and, when it comes to metals, is the largest producer of many, as well. So the country’s surprise decision to devalue the yuan by around 1.9% versus the dollar sent shock waves through commodity markets Tuesday. Analysts at Macquarie offered up a concise explanation for what happened:
“Assume that the metal price in U.S. dollars is constant, then a fall in the yuan against the dollar increases the yuan price of that metal. This should encourage Chinese producers to produce more of the metal, and Chinese consumers to consume less of it,” they said, in a note. “This will mean China needs to import less of the metal (or if it is an exporter, it can export more of metal). This should lower the ‘world price’, i.e. the U.S. dollar price.”..............................................Full Article: Source
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