China’s yuan posts biggest weekly loss on record

In a note published on Tuesday, after the first devaluation of 2 percent was announced, the PBoC said that monetary policy would now allow the currency to float and trade more freely, in a move towards a more market-orientated approach. France and Italy were the main disappointments in the figures, though the German data were also somewhat underwhelming when exports were taken out.

China cut the reference rate for its currency for the third straight day on Thursday, authorities said, after their surprise devaluation of the yuan this week unsettled global financial markets. The most anticipated report, last month’s retail sales, rose 0.6 percent behind large gains in auto purchasing and advances in most other categories.

China’s central bank is rushing to calm fears over the yuan’s plunge in recent days.

“China does not follow a free-floating currency regime and it is known that China’s central bank closely controls the value of the yuan“, said Arie Gozluklu, assistant professor of finance at the Warwick Business School.

“We expect the currency to continue to depreciate over the next few days, given downward pressures… suggesting that the Chinese economy is slowing again”, said Susan Joho, an economist at the private bank Julius Baer.

What observers were told is that the central bank will step in when the market is “distorted”, according to comments deputy governor Yi Gong made to reporters.

Zhang says there used to be a 3-percent gap accumulated between the official rate and market expectations. The broad-based S&P 500 rose 13.97 (0.67 percent) to 2,091.54, while the tech-rich NASDAQ Composite Index increased 4.7 (0.09 percent) to 5,048.24.

“With oil prices lower overnight and the market looking past yesterday’s better Malaysian second-quarter GDP and current-account numbers, ringgit remains vulnerable”, said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd.in Singapore.

An explosion in the Chinese city of Tianjin, also one of the world’s busiest ports, could add to volatility in China’s financial markets.

Investors awaited Friday’s yuan fixing to see if China’s central bank would set its official guidance rate lower for a fourth day.

It said China will open its forex markets, now dominated by domestic banks, to “qualified” foreign institutions. The economic damage from the accident is expected to weigh on growth in the month of August.

ENERGY: Benchmark U.S. crude fell further from a six-year low, down 18 cents at $42.04 per barrel in electronic trading on New York Mercantile Exchange.