A Freer Market For The yuan

The People’s Bank of China devalued the yuan for a second consecutive day on Wednesday, causing another tremor in global markets. Chinese leaders have clearly decided to let market forces dictate the value of the yuan more, in order to influence the IMF. This is because China wants to join the IMF’S select group of reserve currencies (known as Special Drawing Rights, or SDR), which include the U.S. dollar, British pound, the yen and the euro. Freer capital markets for the yuan will be a key factor for the IMF when assessing the yuan’s expected application by the end of 2015.

The U.S. dollar, which is usually seen as a safe haven, actually fell on Wednesday. Was this caused by China decreasing its USD reserves or rather the prospect of seeing the Fed postpone its September key rate hike once again?

In economic news, we are awaiting important U.S. economic indicators today from the start of Q3. Retail Sales are expected to bounce back to 0.6% in July, thanks to a solid job market and car sales, which have once again surpassed the 17 million mark (YoY).

  • Range of the day: 1.2900 – 1.3100

Have a good day!

Mark Donohue

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