That leaves the U.S. government in an “awkward and difficult” position, said Eswar Prasad, a professor of trade policy at Cornell University.
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A cheaper yuan, after all, drives up the price of foreign goods in China.
Still, China’s currency devaluation has broadly been interpreted as a signal of Beijing’s growing worry about slow growth.
Since then the yuan has fallen 2.82 per cent against the greenback in the onshore market but with the currency up almost 15 per cent over the proceeding 12 months on a trade weighted basis, many commentators think it could now easily fall 10 per cent before year end.
If it leads to more devaluations, “it could increase uncertainty and turmoil in global currency markets”, said Biswas in an email.
A bigger threat is the fundamental fact that China’s economy is weakening.
Back in 2009, former PBOC deputy governor Zhu Min said plummeting exports had given China “good reason” to depreciate its currency during the global crisis and that it chose instead to keep the yuan stable.
Duke University business professor Campbell Harvey said China wants the yuan to eventually become a “reserve” currency like the dollar and the euro.
“Longer term, we’re still very bullish on China”, Hau Thai-tang, head of global purchasing at Ford Motor Co, told investors at a conference Wednesday.
Still, officials at the central bank don’t see any inconsistency between the latest effort to make the yuan’s exchange rate more market-driven and the intervention Wednesday, according to people close to the bank.
The yuan extended its losses, dragging the growth-linked Australian and New Zealand dollars to six-year lows with it, while another set of disappointing Chinese data bolstered safe-haven currencies such as the yen.
Bashing China is a time-honored tradition among U.S. candidates for higher public office, and no one has done that with more zest in this election cycle than billionaire Donald Trump.
Adidas Group shares fell 3.7 percent to $68.67.
China tried Thursday to quell fears its yuan would fall further, saying it is close to market levels following declines that sparked fears of a “currency war” if other governments respond by pushing down their own exchange rates.
“From this prospective, China does not have the need to start a currency war to gain advantage”, Massachusetts also said, adding the yuan’s current rate is “near equilibrium”. While the International Monetary Fund welcomed China’s move, it said there was no direct effect on its ongoing review of the SDR basket.
“The PBOC still has plenty of tools to affect the exchange rate by intervening directly in the market”, Polk said. The central-bank action raised such expectations further.
Agent banks sold the dollar around the 6.43 level on behalf of the PBOC Wednesday, said one person familiar with the matter. Exports in July fell by an unexpectedly steep 8.3 percent from a year earlier.
As of now, every U.S. dollar is worth 6.31247 yuan.
“No matter how reasonable it may be, this raises exchange-rate risk nearly everywhere”, said Derek Scissors, a scholar at the American Enterprise Institute in Washington who focuses on Asia economic issues.
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US lawmakers accused China of manipulating its currency, and they called for rules preventing currency manipulation to be included in trade agreements – such as the proposed Trans-Pacific Partnership – with China.
