08.11.15
China’s surprise decisition to devalue its tightly controlled currency early Tuesday, pushed the US dollar higher, but it also fueled speculation that the Federal Reserve will delay its first interest-rate hike, which some observers had expected to come next month.
The yuan suffered its largest one-day loss in two decades following the surprise move, with the dollar jumping to buy 6.3294 yuan—up from around 6.2058 earlier on Tuesday. The yuan had been trading in a tight range in recent months, mainly due to Beijing’s intervention in the foreign exchange market.
The dollar’s strength against major global currencies has taken a toll on US exports in recent quarters, and the Fed is closely watching the effects on the economy as it debates whether to raise interest rates, a move that could make the dollar even more appealing.
The People’s Bank of China’s decision to allow the yuan to devalue by 1.9% is feared by some to be the opening salvo in a new currency war. That would spell trouble for multinationals, who already bemoan the impact that the strong US dollar has had on sales outside the US.
The yuan suffered its largest one-day loss in two decades following the surprise move, with the dollar jumping to buy 6.3294 yuan—up from around 6.2058 earlier on Tuesday. The yuan had been trading in a tight range in recent months, mainly due to Beijing’s intervention in the foreign exchange market.
The dollar’s strength against major global currencies has taken a toll on US exports in recent quarters, and the Fed is closely watching the effects on the economy as it debates whether to raise interest rates, a move that could make the dollar even more appealing.
The People’s Bank of China’s decision to allow the yuan to devalue by 1.9% is feared by some to be the opening salvo in a new currency war. That would spell trouble for multinationals, who already bemoan the impact that the strong US dollar has had on sales outside the US.