China currency fallout continues
The People’s Bank of China lowered the daily fixing for the yuan by 1.6 per cent on Wednesday, just a day after Tuesday’s reduction of 1.9 per cent.
Tuesday’s move had already caused UK-listed commodity and luxury goods stocks to fall in early trading as investors worried about the strength of the dollar and fears of a slowdown in Chinese demand.
Yesterday saw some industry figures warn that a depreciation of renminbi could continue.
Bhaskar Laxminarayan, chief investment officer of Pictet Wealth Management Asia, said: “The Chinese authorities’ intentions are not yet entirely clear.
“The renminbi is likely to find a new level in the next few days, and to depreciate gradually over the rest of the year.
“The authorities will not want the currency to depreciate sharply, as this would damage the goal of renminbi internationalisation and stoke capital flight.”
However in a statement a PBoC spokesman sought to calm concerns about further depreciation of the currency, saying: “In view of both domestic and international economic and financial condition, currently there is no basis for persistent depreciation of RMB.
“China registered a relatively rapid economic growth in the first half of 2015, facing complex and challenging environment both in China and abroad. China’s GDP grew by 7 per cent during the six months ending 30 June 2015, which is considerably higher than most other major economies.”
He also argued that China had maintained a current account surplus for a long time and that the opening up of China’s domestic financial markets had accelerated in recent years.
