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China Currency Concerns Grow As International Stocks Drop

Ryan August 12th, 2015
China Currency Concerns Grow As International Stocks Drop

 

Concerns about China's economy sent shock waves across global markets on Wednesday, shocking currency markets and crushing stocks.

The turbulence came as China devalued its currency for a second straight day, after the Chinese central bank pledged Tuesday to allow the market to play a greater role in setting the currency's value.

The yuan fell as much as 1.98% Wednesday, after Tuesday's move to weaken the currency by almost 2%.

The Chinese central bank intervened Wednesday to prop up the yuan in the last minutes of trading, according to people familiar with the matter, in an apparent effort to prevent an excessive fall in the currency.

The Stoxx Europe 600 index was down 3.0% by midafternoon in Europe, with Germany's exporter-heavy DAX index falling 3.5%.

The declines mirrored a slide across the board in Asia, where Hong Kong's Hang Seng HSNGY -3.20 % Index fell 2.4%, Japan's Nikkei 225 index dropped 1.6% and China's Shanghai Composite Index was down 1.1%.

"Markets are taking fright at the recent move in the yuan. They are afraid that it signals concern about the Chinese economy," said Mark Evans, a fund manager at THS Partners, which oversees $4.6 billion in assets.

Elsewhere in currency markets, the dollar fell against the euro and the yen as investors weighed up the potential impact of the weaker yuan on the Fed's plans to raise rates this year.

Beijing weakening the yuan will "Put the U.S. under the spotlight as being the single large economy in the world bearing the burden of an appreciating currency," said Jean Médecin, a member of the investment committee at Carmignac, which oversees €58 billion in assets.

This article originally appeared on wsj.com

 

 

Over to you

Do you believe China did the right thing by devaluating its currency? What do you think will happen to the Chinese Yuan? Share your opinion and thoughts in the comments below.

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