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Here’s Why China Devalued the Yuan
China’s exports are slumping, and its FX reserves are dwindling
by Joseph Adinolfi
Market Watch
China’s decision to devalue the yuan Tuesday marked the most significant shift in the country’s foreign-exchange policy since it abandoned a hard peg to the U.S. dollar 10 years ago.
Chinese policy makers have continued to exercise tight control over the yuan. The currency, also known as the renminbi, is allowed to trade 2% in either direction around a central fixed rate, which is set daily by policy makers at the People’s Bank of China. The process of how the central rate was set was relatively opaque.
Now, policy makers will base the fixing rate on how the yuan traded at the close of the previous trading day, ceding more control to market forces.
In a statement, representatives of the People’s Bank of China said they devalued the yuan because they want it to better reflect market forces. But a weaker, more market-oriented yuan will also benefit China’s economy in several ways.
Continue Reading at MarketWatch.com…
Source: http://financialsurvivalnetwork.com/2015/08/heres-why-china-devalued-the-yuan/?utm_source=rss&utm_medium=rss&utm_campaign=heres-why-china-devalued-the-yuan
