Currency depreciation will to continue throughout 2016, predicted Brian Jackson, China economist at IHS Global Insight, in a note Thursday. That said, its regular tripping indicates the thresholds are now set too low, when in the third quarter of 2015 the mechanism would have tripped 20 times. Bank of New Zealand sees the market fair value close to the $0.6400 and expects further downward pressure over the rest of the month. “China is a command economy but you can not have a command stock market”.
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There are “lingering concerns” within the Fed about China, particularly whether a slowdown there could impact USA economic growth and jobs or, more likely, pull down global inflation and keep the Fed from reaching its 2 percent inflation goal, according to the minutes from the Fed’s December policy meeting, which were released this week.
NEW YORK – Shares on major exchanges fell for a sixth consecutive day on Thursday while crude prices bounced back from multi-year lows as volatile markets digested another move lower in the yuan and Chinese efforts to stabilise a sinking stock market.
The hair-raising losses on mainland Chinese markets this week had prompted a flight to Japan’s currency – seen as a safe bet in times of turmoil and uncertainty. Chinese policymakers have been devaluing the yuan to maintain its competitiveness in the global market.
Copper for March delivery fell 0.26% to $1.018 a pound, while silver futures eased 0.97% to $14.205 a troy ounce. When all trades were cleared the CSI300 settled down 6.9% to 3,294.
The pan-European FTSEurofirst 300 index and the eurozone’s blue-chip Euro STOXX 50 index were down 2.4% and 1.8% respectively, having fallen more than 3% earlier in the session.
The shock waves adversely affected our financial markets.
The latest trigger for the slump came after the People’s Bank of China (PBOC) set the official dollar/yuan midpoint rate at 6.5314, the weakest fixing since 2011.
China’s central bank moved it even lower on Thursday since its surprising devaluation in August.
The central bank, The People’s Bank of China (PBOC), has said its main exchange rate target is against a broader basket of currencies and it’s not fixated on the greenback.
Currencies throughout Asia tumbled as well.
Major indexes in the USA shed over 2 percent each overnight.
After opening in London, the offshore yuan had taken back all its losses to stand higher on the day at 6.6905.
In particular, analysts were swift to call out what appears to be a ham-fisted approach to managing market volatility.
The crude oil market has so far shrugged off rising geopolitical risks such as the tensions between Saudi Arabia and Iran, and North Korea’s nuclear test.
European stocks followed Asia’s lead.
Under the circumstances, the Chinese and Korean currencies are showing a greater tendency for coupling than before these days, implying that global investors’ concerns over the Chinese economy are spreading to the Korean economy as they are.
The Dow Jones industrial average .DJI fell 211.2 points, or 1.25 percent, to 16,695.31, the S&P 500 .SPX lost 25.97 points, or 1.3 percent, to 1,964.29 and the Nasdaq Composite .IXIC dropped 79.34 points, or 1.64 percent, to 4,756.42.
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It was the Dow’s worst four-day start to a year in more than a century.
