Beijing devalues yuan once again amid fears for global stock markets
Beijing (AsiaNews / Agencies) - China's Central Bank this morning devalued the national currency, the yuan renminbi. The currency has been cut by a further 1.62%, added to 1.9% cut yesterday by the Chinese authorities. Beijing had declared that the move on Tuesday 11 - the most significant in Chinese monetary policy in over 20 years - is a "one-off".
Now the yuan is trading at 6.3306 against the US dollar, the reference for Chinese currency. The central government in Beijing has made it clear that the decision is a change of parameters: until recently the value of the yuan was decided by the Central Bank, as of today, it will be based on developments in the international financial and currency markets.
Although the earthquake caused yesterday on exchanges around the world by this decision – there were important losses in the luxury goods sector, since the purchasing power of the Chinese has taken a hit- the IMF has assessed this double devaluation positively. The operation, according to the international body, "is integrating into global financial markets".
Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole says the yuan is facing “a vicious cycle of depreciation”. “At some point they’ll either abandon the implementation of the new fixing mechanism and stabilize the fixing, or they’ll intervene heavily.”
" The reference is to the international currency market: here currencies fluctuate based on financial performance, but not the Chinese currency whose exchange rate, in fact, was set up yesterday by the central authorities.
The reactions of European stock exchanges and that of Wall Street were less certain. They will only register the response of international finance to Beijing's decision in today's trading.
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07/12/2006
