In what it called a “one-off depreciation”, the People’s Bank of China said the yuan midpoint was reset to 6.2298 per US dollar, its lowest value to the US dollar for nearly three years.
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“Since China’s trade in goods continues to post relatively large surpluses, the yuan’s real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations”, the bank said in a statement.
China on Tuesday devalued its currency in a way that left it 1.9% weaker versus the U.S. dollar. “With inflation pressures absent – indeed, the strong currency had been contributing to a deepening deflationary impulse in certain segments of the economy – there seemed no economic reason to stubbornly hang on to a stable bilateral exchange rate with the strengthening US dollar”.
The devaluation could present a dilemma for the United States and other governments that accuse Beijing of suppressing the yuan’s exchange rate, giving its exporters an unfair price advantage and hurting foreign competitors.
In Asia, some are likely to see the move as a sign that China is weakening its currency intentionally, possibly in reaction to very weak export data released over the weekend.
The design of the new bank note will stay largely the same as the 2005 series but have enhanced security features including colors of the number 100 and patterns at central of the note, the PBOC said.
THE QUOTE: China’s yuan announcement “looks to be a move to a more open market policy”, said Stephen Innes, senior trader at OANDA.
China’s central bank, however, stressed that the policy change is part of reforms designed to allow market forces to have more influence over the yuan.
The currency dropped 1.4 percent to 6.2980 per dollar as of 11:12 a.m.in Shanghai, and slid 1.6 percent in Hong Kong’s offshore trading. The central bank also needs to demonstrate that it is in control, at a time when the stock market collapse has taken a toll on China’s image.
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Adecco Group reported that its net income for the second-quarter 2015 rose to 177 million euros from 145 million euros previous year. The composition of that basket is secret but the dollar appears to dominate it, which means the yuan has been rising even as the currencies of other developing countries fell.
