China has devalued its currency to boost flagging exports in a move that risks deepening the global currency war.
After recent data showing falling exports and a stalling manufacturing sector, the central bank said on Tuesday that it was allowing the yuan to weaken by nearly 2% in the hope of making China’s exports cheaper and pushing down borrowing costs.
In what it called a “one-off depreciation”, the People’s Bank of China said the centre of the yuan’s trading band was reset 1.9% lower at 6.2298 per US dollar, its weakest point against the US dollar for almost three years. The midpoint will now be based on the previous day’s closing price rather than being controlled centrally.
The impact of the decision was felt across regional markets as investors fretted about a prolonged fall in demand from the world’s second biggest economy.
The US dollar gained against a basket of currencies, moving up 0.2% to 97.506.