China’s yuan moves slightly higher

The PBOC also said on Thursday that it would monitor “abnormal” cross-border flows after the devaluation raised fears that investors would seek to pull capital out of China in anticipation of further falls in the currency.

The central bank put the yuan’s central parity rate at 6.4010 yuan for $US1, the China Foreign Exchange Trade System said, a drop of 1.11% from the previous day’s 6.3306.

China keeps a tight grip on the unit, allowing it to fluctuate up or down just two percent on either side of the reference rate, which it sets daily.

The devaluation is likely to cause Korean mobile phones, mobile phone components, ships, electronics products, and the like to become less competitive in price due to the high export similarity between Korea and China regarding those items. Massachusetts described the yuan’s current rate as “near equilibrium”.

An spokesperson for the global financial institution said that China’s move to allow market forces to have a greater role in determining its exchange rate “appears a welcome step”.

Asian stock markets drifted Friday as China’s currency stabilized for a second day, easing uncertainty about its direction after an unexpected devaluation earlier in the week.

Reuters reported on Wednesday that the central bank was under pressure from factions within the government to deeply devalue the yuan in order to support struggling exporters. Angus Nicholson, a market analyst at IG in Melbourne said the pace of decline would slacken, but that the currency could depreciate by 10 per cent or more over the next 12 months.

“China does not have the need to start a currency war to gain advantage”, he was quoted as saying by the official Xinhua news agency.

The yuan and other Asian currencies account for 40 percent of the dollar’s trade-weighted effective exchange rate, Yamamoto said. The worry for that nation is that a weaker yuan will hit China’s imports, including products from Malaysia at a time when the nation is already facing lower commodity prices and the prospect of political instability.

The People Bank of China follows a different playbook.

Alarmed by a slew of weak economic data, the central bank unexpectedly devalued the yuan by almost 2 percent on Tuesday, sparking turbulence on the currency and stock markets.

CRUDE OIL: Benchmark U.S. crude fell 99 cents to $42.30 on the New York Mercantile Exchange, hovering close to a six-year low.

As previously reported, Chinese exports in July came in 8.3% lower than the prior year after fears that the strength of the yuan was rendering Chinese exports uncompetitive.