After the panic that took over financial markets following the devaluation of the Chinese Yuan, the People’s Bank of China decided to let its national currency recover a bit of the lost ground. In particular, after the 1,9% devaluation, the USDCNY exchange rate managed to win back 0,05%, Masterforex-V Academy reports.
The People’s Bank of China initiated such a decision on Friday, August 14th. The information is confirmed by the official website of China Foreign Exchange Trade System.
In particular, Masterforex-V Academy reports that Friday’s basis exchange rate of the Chinese Yuan versus the U.S. Dollar is equal to 6,3975 CNY per 1 USD. For the sake of comparison, Thursday’s USDCNY exchange rate was equal to 6,4010. Since the mentioned devaluation of the Chinese Yuan triggered instability and panic in financial markets, including the global market of crude oil, there are many reasons to expect further stabilization in the Renminbi exchange rate.
The following chart is provided by Masterforex-V Academy:
It should be reminded that the People’s Bank of China announced its decision to devalue the Renminbi on August 11th. On that day, the exchange rate was changed by 1,86%. This was followed by another instance of devaluation. This time it was equal to 1,62% and took place on Wednesday. Thursday was another bearish day from the Chinese Yuan. On that day, the currency lost 1,12% more of its value against the U.S. Dollar. As a result, USDCNY reached the level of 6,4 CNY per 1USD.
In 3 days, the overall devaluation amounted to 3,3%, which is quite a lot for the currency of the world’s second major economy (which is about to oust the American economy and become the world’s leading economy). This is the biggest devaluation of the Chinese Yuan since 2005. At that time, the People’s Bank of China decided to unpeg the Yuan from the U.S. Dollar and switch to the system of controlled floating exchange rates.
China’s Central Bank Promises to Suspend Devaluation
The People’s Bank of China promised to avoid any further devaluation in the near future. This leads us to believe that there is going to be no further drop down to the 4-year low. The representatives of China’s central bank assure everyone that there are no reasons to devalue the Renminbi any further. Whether it is true or not, the People’s Bank of China is obviously trying to make verbal intervention and calm down the concerned trading and investing society to avoid even bigger market panic and cap it before it actually goes out of control.
The representatives say that the external and internal economic and financial situation in China appears to make any further devaluation of the Chinese Yuan pointless. That is why the central bank is not planning any further steps aimed at devaluing the Chinese national currency.
