Daily Market Analysis – 11th Aug, 2015
By FxGrow Research & Analysis Team
People's Bank of China Devalues Yuan to Increase Exports
China has devalued the Yuan to combat slowdown, which had ripple effects on the Forex markets as the People’s Bank of China cut its daily reference rate by 1.9 percent.
People's Bank of China depreciated Yuan by 1.9 percent against the US dollar to levels seen almost three years back, which came as a shock to the currency markets.
The statement that was released by the Central Bank said it had changed the way it calculated the currency's daily midpoint against the greenback, now taking the midpoint from market-makers quotes and the previous day's closing price.
Monetary policies in emerging market economies diverged and it was hard to make policies - People's Bank of China.
The Yuan dropped 1.8 percent to 6.32 per dollar as of 1:34 p.m. in Shanghai. It slid 2.3 percent in Hong Kong’s offshore trading.
The ECB reinforced its accommodative monetary policy. The euro area is confronted with the threat from persistent declining inflation and low growth potential. The Bank of Japan announced additional easing monetary policies. The Bank of England maintained its easing monetary policies - People's Bank of China.
The Federal Reserve ended the program of asset purchases. The world economy faces the challenge that the policy rate of the U.S. may rise. The global financial conditions may tighten and emerging market economies may be faced with the sudden reversal of capital flows if the Federal Reserve raises its policy rate earlier than expected - People's Bank of China.
"Since China's trade in goods continues to post relatively large surpluses, the Yuan’s real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations" - People's Bank of China.
The devaluation followed weekend data that showed China's exports tumbled 8.3 percent in July, hit by weaker demand from Europe, the United States and Japan, and that producer prices were well into their fourth year of deflation - Reuters.
The move by the People's Bank of China overnight could have a significant impact on whether the Federal Reserve decides to hike interest rates this year.
Greece has agreed a bailout deal with its European creditors according to the European Commission as it said a technical agreement had been reached with Greece, which now requires political approval.
In Germany Investor confidence dropped to 25.0 in the month of July according to a report released by the ZEW Center for European Economic Research.
Crude oil is trading lower at $44.07 on oversupply and weak global demands.
Gold is trading higher in the Europe at 1109.31, while Silver is up at 15.25
11th Aug 2015 – 11:41hrs GMT
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