China has surprised the currency markets by devaluing the yuan (otherwise known as renminbi) by 1.9% last night. It’s an apparent policy u-turn by the People’s Bank of China, which maintains a daily fix, or 4% price range, against the US dollar by the force of its vast foreign currency reserves.
The repercussions of this decision could be significant, hitting already suffering American exporters and heaping yet more deflationary pressure on Europe as Chinese imports get cheaper.