Yuan closes lower against $US

With foreign exchange reserves of around $3.65 trillion, China has plenty of scope to sell dollars and shore up its own currency.

That may help some of David’s holdings, such as Canadian Solar (symbol: CSIQ) and Trina Solar (TSL), the world’s largest solar-panel manufacturer.

Still, the global economy may weather this storm without any big moves by worldwide policymakers. The latest indication of trouble was that exports in July dropped 8.3 percent from a year earlier. Economists did not see Beijing’s transfer as an effort to scale back the yuan to an artificially low degree.

This has resulted in a loss of market liquidity in recent years and has frequently proven an unreliable measure of market sentiment.

Strictly speaking, this was not a “devaluation”. That has laid a solid foundation for a stable exchange rate. If it is increased, the term is “revaluation”.

Rather than precluding growth as a reserve currency, fluctuations in foreign-exchange rates appear to accompany this development. Incoming data on consumer inflation, a key Fed data point, and July housing starts and existing home sales, also could also shed light on the Fed’s next move. In normal times, the U.S. dollar has been in such a pure float since 1973.

Whatever the reasons, the People’s Bank of China yesterday assured the market that there was no basis for the depreciation to persist, and that it will step in when excessive volatility arises.

“The near flat-line trade in US dollar-Chinese yuan cross rate in local trade Friday followed by another dip into the close suggests that, for now at least, the PBoC wants to further calm nerves”, he said. But this target rate is not rigid.

“Western central banks have set us up for an even bigger version of the 2008 great financial crisis/recession”, he writes in a report obtained by Newsmax Finance.

However it is more probable that the adjustment in the dollar-yuan link forms a central element in an orchestrated strategy with the International Monetary Fund that increases the likelihood that the yuan will indeed join the SDR, in a decision that would be implemented in September 2016.

Gold production will fall over the next few years.

But if China’s economy weakens further, the country’s leadership may not have the luxury of being able to massage its currency incrementally lower.

Every single industrialized nation without exception, and many in the developing world, has resorted to currency devaluation as a Band-Aid fix at one time or another. Specifically, does lack of intent matter? As interest rates in the U.S. drifted higher and China lowered rates, the once attractive 4% pickup in yield collapsed to less than 2%.

Several analysts said last week that the Chinese wanted to push down the value of the yuan to make its exports cheaper without antagonising rival trading blocs.

On August 11, 2015, the People’s Bank of China lowered the yuan’s exchange rate by nearly 2 percent. During this transition it would be risky in the extreme to expose the Chinese currency totally to market forces.

The Chinese yuan was steadier against the dollar on Monday, easing fears that China could let the currency fall further after last week’s surprise devaluation rattled global markets. Charles Schumer think?

“Overall, there are other problems with the Chinese economy beyond poor export performance and the stock market“. Moreover, as in 1997 in Korea and Hong Kong, the positions of sundry Chinese financial companies are highly opaque.

For the commodity sensitive currencies (AUD, CAD and NZD), investors will need to tune in later this evening to the RBA’s policy-meeting minutes and for tomorrow’s New Zealand Fonterra dairy auction to get a better understanding of their respected currency moves.