These are the biggest losers from China’s currency devaluation

While a weaker yuan will not cure all the ills of China’s exporters, which suffer from rising labor costs and quality problems, it would help relieve deflationary pressure, a far bigger economic concern in the view of some economists.

On Wednesday, the yuan dropped another 1.6 percent.

The yuan’s slide to a three-year low instantly rippled across the world.

It was the biggest one-day fall since a massive devaluation in 1994 when China aligned its official and market rates.

However, the agency maintained that 2 percent devaluation of Yuan alone is unlikely to aid Chinese exporters who are suffering from surplus capacity and moderating global demand. As of 8:39 a.m.in New York, stock futures on the Dow Jones Industrial Average were in the red by 147 points.

China becomes the third major economy to act to lower its currency value. Initiatives by Japan and the European Union over the past two years depressed the yen and euro by a wider margin than this week’s decline in the yuan.

The International Monetary Fund proposed in a report this month to put off any move to add the yuan to its benchmark currency basket until after September 2016, and it gave mixed reviews of Beijing’s progress in making key financial reforms to its currency market. The process of how the central rate was set was relatively opaque.

The opening-up of the foreign exchange market, extending trading hours, introducing qualified foreign institutions and promoting the formation of a single exchange rate in both onshore and offshore markets will continue to be targeted by the central bank. Ralhan said the move may lead to a currency war as can be seen by huge depreciation in numerous currencies such as Euro, Japanese Yen, Brazilian Real, Turkish Lira, etc.

“Treasury now has to choose which is more important”, said Chovanec, also Adjunct Professor at Columbia School of global Public Affairs.

THE QUOTE: China’s yuan announcement “looks to be a move to a more open market policy”, said Stephen Innes, senior trader at OANDA.

An unnamed central bank official said in a statement government support for the stock market was one reason for the year-on-year increase.

Those moves contrast with action expected from the Federal Reserve, which is widely expected to boost the short-term interest rate it controls later this year. U.S. exporters have long complained that China manipulates its currency to gain a trade advantage. By making Chinese goods comparatively cheaper in the United States, a weaker yuan would push already-low U.S. inflation even lower. China’s decision to devalue its currency could further complicate the Fed’s decision on when to raise rates. Inflation has risen just 1.3 percent in the past 12 months. Should the US economy stumble in the coming weeks, “dollar strength would only further embolden the doves at the next meeting”, Feroli said.

USB economist Tao Wang said Beijing would likely move cautiously, but investor expectations of further weakening “could quickly become entrenched” and cause the yuan to “depreciate quite quickly and significantly”.

As China’s once-breakneck growth has slowed, its reduced demand for foreign raw materials – from oil to coal to copper – has, in turn, slowed growth in countries like Australia and Brazil.