China devalued the yuan by the most in two decades, a move that rippled through global markets as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asia’s largest economy.
China devalued the yuan by the most in two decades, causing instability in global financial markets.
The rate was cut by 1.9% as an effort to curb the steep slowdown and lower the governments grip over the economy. They had previously been maintaining the currency to stop capital outflows, this latest move may be a sign that they are moving away from this. The Yuan slid 2.6% in response.
Chinese airline shares fell on concerns debt costs in dollars will rise.
The yuan’s real effective exchange rate had climbed 13% in the past year. The PBOC argued that the strong yuan put pressure on exports, citing this as a reason for the devaluation.
There could be a risk of deflation as a result of these measures. More measures, will be put in place, such as lowering reserve limits.