A falling yuan hampers U.S. exports to China by making them more expensive in yuan terms.
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Zhang said the yuan is close to “market levels” after two days of declines.
The dollar index was 0.2 percent up on the day at 96.711, but still not far from the one-month trough of 95.926 reached last week.
The indexes had slumped more than 5 percent at one point in morning trade, after plunging 6 percent on Tuesday following comments by China’s securities regulator that the market has normalised and the government would allow market forces to play a bigger role in determining stock prices.
The basis spread between the offshore and onshore yuan has tightened after last week’s blowout, a sign of reduced market stress.
A weak currency is certainly not in line with Chinese leaders’ vision for the world’s second-largest economy, especially when Beijing is trying to attract investments for the Silk Road Economic Belt and 21st Century Maritime Silk Road initiatives.
Beijing has been lobbying the global Monetary Fund to include the yuan in its basket of reserve currencies known as Special Drawing Rights, which it uses to lend to sovereign borrowers.
The New York Fed’s Empire State general business conditions index tumbled from 3.86 in July to -14.92 in August, its lowest since April 2009, due to steep drops in new orders and shipments.
Plenty of reasons. The surprise devaluation suggests that something is spooking the Chinese government. Perhaps the Chinese economy is decelerating even faster than anyone realizes.
If nothing is done to stimulate exports, China might have difficulty achieving this year’s GDP growth target of 7 per cent. Compared with significant depreciation by other currencies, such as the yen, the recent adjustment in the yuan’s central parity rate should be regarded as a prudent move. “China needs to rely less on exports and more on domestic consumption”. Investors are also anxious about how a weaker yuan will affect exporters in other countries.
Wall Street shares rose on Monday though two highly contrasting U.S. economic indicators left many market players scratching their heads on the state of the U.S. economy and added to uncertainty over when the Federal Reserve will begin raising interest rates.
“The combined drop is the biggest since China set up its modern foreign exchange system in 1994”, when it devalued the yuan by 33% at a stroke.
Many Ghanaian manufacturers are anxious about the impact the devaluation of China’s currency will have on their businesses in Ghana.
On Wednesday, Vietnam devalued the dong for the third time this year as authorities sought to support a languid export sector facing fresh challenges from the Chinese devaluation.
“However, if FX intervention continues, RRR cuts will be inevitable”, wrote the French bank. The Fed has kept the rate at zero since December 2008.
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Johannesburg-based economist, Ceec Bruggemans, predicts that the South African rand ill follow the downwards path of the Chinese yuan over the next year or so.
