US stocks, oil prices sink after China currency move

The yuan had strengthened along with the dollar, hurting exporters and raising the risk of politically risky job losses in manufacturing industries that employ tens of millions of workers. Holders of yuan can preserve value by purchasing bitcoin and then cashing out to yuan, later, if bitcoin were to advance; or, cashing out to US dollar if bitcoin price were to decline. Peoples Bank of China (PBOC) surprised the market today by introducing much awaited devaluation of currency to stimulate economy.

Following the change, the central parity rate of the RMB, or the yuan, weakened sharply by 1,136 basis points to 6.2298 against the U.S. dollar on Tuesday.

A Chinese yuan sign is seen at a currency exchange shop in Hong Kong, Tuesday, August 11, 2015.

July exports fell by an unexpectedly large margin of 8.3 percent from a year earlier.

The deal on a third bailout for Greece also helped yields on lower-rated Spanish and Italian bonds drop 3 bps apiece while Greek two-year yields fell 4 percentage points to 15.25 per cent.

Stocks fell in Asia and Europe as investors anxious about the implications of a move designed to support China s slowing economy and exports.

Devaluation is a deliberate decision by a government to adjust the value of a currency downward relative to another currency or standard.

“It is a small step forward to accommodating market forces”, said Sung Won Sohn, an economics professor at the California State University’s Smith School of Business.

The Fed is weighing its first rate increase in more than nine years and has said it will take global developments into account in deciding when to tighten. The yuan quickly fell 1.3 percent against the dollar and was down 1.9 percent by the afternoon. The country’s leaders fear that growth below that pace will raise the unemployment rate and possibly lead to social unrest.

The move to allow the yuan to depreciate against the U.S. dollar sent Canada’s dollar lower, to 76.08 cents U.S.as of time of writing. The company said last month that it was expecting a strong second-half of the year in China. “Rather than changing their ways, the Chinese government seems to be doubling down”.

The Peoples’ Bank of China cut its 1-day rate by 1.9% and, thereby, triggered yuan/dollar devaluation – the biggest one-day drop since January 1994. Japan’s Yen also fell to a two-month low. Its economy expanded at a rate of 7.4% in 2014-the slowest level in decades.

China s shock 2 percent devaluation of the yuan on Tuesday pushed the dollar higher and raised the prospect of a new round of currency wars, just as Greece reached a new deal to contain its debt crisis. This is because the weakening of the currency against the dollar makes U.S. furniture more expensive for Chinese consumers. Traders are allowed to trade within a range of 2 percent (plus or minus) of this fix.