What does the Chinese currency devaluation mean for markets?

Dr Shane Oliver, Head of Investment Strategy and Chief Economist explains the implications of the yuan move. “The move reflects an ongoing stimulus program to help Chinese economic growth. Secondly, the risks are that there could be a further depreciation of the Renminbi to come. However, with China running a big trade surplus and its share of global exports still rising, a major depreciation is unlikely…Thirdly, downwards pressure will likely remain on the currencies of countries that China competes with otherwise they are likely to become less competitive. In light of this, expect more downwards pressure on other Asian and emerging market currencies. Finally, with China devaluing its currency, this puts pressure on developed countries to maintain or accelerate easy monetary policies and could, at the margin, delay the Federal Reserve from tightening in September. In aggregate, this should help global growth at the margin and, as a result, share markets over the medium-term…A more flexible Renminbi should be positive for global growth and stability, but we are still some way from this yet.” For more insight click the (VIEW LINK)


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