Asian shares edge lower as crude oil spirals down

This week’s surprise devaluation of the yuan, also known as the renminbi or people’s currency, came after the central bank said it wanted the exchange rate to reflect market forces. The spot market opened at 6.3990 per dollar and was changing hands at 6.3996 in the morning. The Standard & Poor’s 500 index rose three points, or 0.2 percent, to 2,086.

“A flexible RMB that is free to move up or down is of enormous benefit to China and the world economy“, he said, saying that the greenback, the Euro and the Yen are all flexible currencies.

The country’s Central Bank raised the value of the yuan by 0.005pc against the dollar.

Zhang Xiaohui, PBOC assistant governor, said the decline of the yuan had released “accumulated” depreciation pressure of around 3 percent, adding that loosening monetary policy has added to downward pressure on the exchange rate.

China has sparked fears of a global currency war after the People’s Bank of China set the reference rate for its currency more than 1% lower against the US dollar yesterday, its third reduction in three days.

“The whole Chinese luxury goods market, especially imported beauty products, has been on fire for years, but in the last year things have really turned around”, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. However, by Thursday, the yuan found a new equilibrium as the PBOC intervened via agent banks and signaled that the currency had fallen enough at a rare press briefing, according to Bloomberg. As long as China continues to devalue its currency, Taiwan’s unit should follow.

The bank had on Tuesday announced it would start setting the daily rate based partly on the previous day’s trading, bringing the yuan closer to a free-floating currency.

This does make Chinese exports cheaper, which to an extent is what the government wants, given China’s economic slowdown. The yuan fell 1.9 percent on Tuesday, the second largest single-day decline in over 20 years.

Nevertheless, the analyst said Russia’s central bank had originally planned to implement a similar policy of controlled devaluation, selling U.S. dollars to support the ruble if it reached the limits of the established currency corridor.

U.S. government bonds sank, lifting the yield on the 10-year Treasury note to 2.19 percent from 2.15 percent late Wednesday.

South Korea’s market was closed for national holiday.

That’s a shift from a statement from Chinese financial regulators in 2014, who told investors to “invest rationally, respect the market, fear the market”. The economic damage from the accident is expected to weigh on growth in the month of August. Our modelling suggests a 10 per cent Chinese devaluation with no response from others would benefit China, but lower world GDP growth by 0.25 per cent in 2016 as other countries lost out.