What does China have a weaker currency? – Portafolio.co

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Bloomberg

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The deepest decline yuan in two decades is something that changes things. The last time I experienced such a currency movement in 1994, the Chinese economy stood behind Canadian in eighth place worldwide, and few outside its borders could have said the name of the currency.

Now, the process of the country to allow greater market share in setting the level of the yuan influences on currencies, commodities and equities worldwide and reformulates the global economic outlook.

The following are some of the ways that a sustained decline in the yuan will feel.

The Fed may take off if the dollar continues to strengthen? Analysts at Bank of America Merrill Lynch are among those who think that the devaluation of the yuan darkens the outlook for Janet Yellen

It was easy money. Taking cheap credit abroad, take some so the funds to China for a strong interest rate margin and sell later, when you get a foreign exchange gain. A sustained decline in the yuan would land with that.

Even if you do not have account the weaker yuan, deepening deflation and contagion likely to export prices meant toys, shirts and cheaper televisions worldwide. If she now joins the weakening of the currency it could reach noted that Chinese devaluation revive global fears of deflation.

Global prices-the commodity most which continues to price in US dollars- have been affected since the movement of the yuan. Further weakness would be a bad omen for the economic prospects of the dependent countries, including Australia, Brazil and Chile.

A weaker yuan also means that Chinese consumers now find it Germans buy more expensive cars, Swiss watches and French handbags. That’s bad news for a region steeped in gloomy prospects, especially Chinese tourists reduced their holidays abroad.

Asian stocks fell, and the Topix Index Japan could download 5 10 percent if the yuan depreciated more than 10 percent, according to BofA.

A weak yuan boosts the sale of other regional currencies. Vietnam has already responded with an expansion of the dong’s trading band. Will other central banks may be forced to take defensive measures

No doubt there is an upside: if a weaker yuan helps China recuperate, it will be a plus for the economy global.

Bloomberg