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China Devalues the Yuan for a Second Consecutive Day

“The late rout in Chinese stocks appears to have knocked sentiment in Europe this morning”.

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The event proves that there could be a fading away of the relief which many investors received at the far end of the second week of August. July exports fell by an unexpectedly large margin of 8.3 per cent from a year earlier. New Zealand’s NZX 50 Index rose 0.1 percent.

The Shanghai share index plunged more than 6 percent Tuesday, its biggest drop in three weeks, as investors resumed sell-offs of Chinese stocks despite the stabilization of the Chinese yuan after a sharp devaluation last week. There were also fears that Beijing may be intent on a deeper devaluation of the currency despite the central bank’s reassurances.

Japan’s Nikkei fell 0.2 percent.

Thai shares, meanwhile, notched their steepest decline this year and the baht slid to its lowest level since 2009 after a bomb attack killed at least 20 people and injured scores in Bangkok.

The worries about China came on a day when trade in the yuan was relatively calm after Beijing fixed the currency’s exchange rate marginally higher for the third successive session. I think the Chinese policymakers are going to continue to be very careful in how they move forward and will not likely make dramatic changes to the currency. But the central bank said its goal was to give market forces a bigger role, a step Washington has demanded.

Asian shares were mixed on Monday, with Tokyo helped by better than expected Japanese growth figures and Shanghai boosted by a government pledge to support China’s volatile stock markets.

The British pound also gained, rising to a 7 1/2-year high on a trade-weighted basis as UK inflation data released on Tuesday beat expectations, bolstering bets that the Bank of England will raise interest rates in the coming months.

“This will contribute towards greater economies-of-scale over time”, she said.

The People’s Bank of China devalued the yuan by almost two per cent last Tuesday which rattled the regional currencies including the ringgit. Further ahead, Wednesday’s minutes from the latest Federal Reserve meeting should offer clues on the timing of a U.S. interest rate rise, which many investors expect as soon as next month.

Benchmark 10-year Treasury notes were down 13/32 in price to yield 2.1961 percent.

It is imperative to state that crude oil futures hit a six and a half year low last week on the back of the yuan devaluation and the strong rally seen in the dollar which was seen as a huge negative for dollar denominated commodities like crude and gold.

The Dow Jones industrial average fell 33.84 points, or 0.19 percent, to 17,511.34, the S&P 500 dropped 5.52 points, or 0.26 percent, to 2,096.92 and the Nasdaq Composite declined 32.35 points, or 0.64 percent, to 5,059.35.

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According to Bank Negara Malaysia, only 1.3 per cent of trade between Malaysia and China last year were invoiced and settled in renminbi.

China Devalues the Yuan for a Second Consecutive Day