According to Donald Trump, the billionaire businessman, the devaluation of the yuan will create a devastating effect of the US economy.
Earlier today, China made a bold move and devalued its currency after weak economic data on yuan since the 90’s. China’s central bank made 1.9% devaluation. Some traders expect a long-term drop in the exchange rate.
Asia’s central banks are holding their breath after China’s devaluation of yuan. Weaker yuan means Chinese exports cheaper than its competitors. Retaliation from competitive countries such as South Korea, India, Indonesia and Japan is possible, but not immediate.
Euro hit 11-day high against the dollar, making up for the previous losses. After China’s surprising devaluing move, investors take care of their euro positions.
Last week Euro saw $1.0960 against dollar, but as investors get back the single currency, Euro regained 0.3% percent and traded at $1.1045. Greece finalized the night talk with a settlement of a multi-billion-euro bailout agreement.
Euro also reached high peak against yuan at 6.9816 and so did Sterling which traded at 9.8690 against Chinese currency earlier today.
Most analytics, however, do not see an immediate cause for concern from the Chinese devaluation. To some, it looks like an effort to recover some competitive edge China lost in international markets. With economic slowdown on the horizon, devaluing the yuan was the only one thing China hasn’t tried yet.
On the other hand, it seems that devaluation of yuan causes currencies such as Singapore dollar, South Korean won and Taiwan dollar to slide down and therefore we all might be seeing some devaluation war headlines in the near future.
(source - reuters.com)