To express its commitment to the transformation of China’s economy, the Xi Jinping administration went so far as to declare that the market forces will begin to play a more “decisive role” as the state decreases its intervention in economic affairs.
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Last week, gold prices slid slightly lower on Friday as the dollar moved higher on the back of upbeat U.S. economic reports, as investors continued to mull the implications of China’s currency devaluation on the timing of an initial U.S. rate hike.
The yuan slipped 0.3 percent versus the dollar on Tuesday and last stood at 6.4113.
A more market-oriented pricing mechanism for the yuan is expected to help avoid excessive deviation from the equilibrium level and significantly reduce the possibility of sudden fluctuations, Massachusetts said, adding that the economy is expected to grow about 7 percent this year.
The measure by the People’s Bank of China to allow the renminbi to nosedive has raised speculation that the Chinese economy has more severe problems than thought.
“While the Fed will likely point to a rate hike soonish, I don’t see a lot of table banging that we have to move in September“, said Josh Shapiro, chief economist at MFR Inc.
Calm was returning to currency markets after mainland China spooked investors last week by devaluing the yuan and moving to a new system for calculating its daily trading reference rate. Traders say they do not rule out further but milder weakening in coming weeks, but do not believe Beijing will engineer a big devaluation or a series of devaluations to boost exports.
That said, even when the Fed does ultimately decide to raise, a higher U.S. policy rate shouldn’t compel the Bank of Canada to tighten its monetary policy in response and that means that our fixed and variable mortgage rates should remain at or near their current levels for the foreseeable future.
Gold firmed on Monday, building on its biggest weekly rise in three months, on lingering uncertainty over the implications of China’s yuan devaluation.
“But there’s some questions marks now about whether or not they will raise rates after what the Chinese did last week”.
On August 11 the Chinese Yuan (Renminbi) dropped in value by about 2%, pushing the Chinese stock market woes and the standoffs at the Trans-Pacific Partnership negotiations out of the headlines.
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The U.S. consumer-price index probably rose 0.2 percent in July, according to the median estimate of 62 analysts surveyed by Bloomberg. Negative number indicates that spot yuan is trading stronger than the midpoint. Rather than following the market down, the PBOC appears to be leading it.
