China’s Devaluation Of Yuan Slams U.S Stocks

779 words - 4 pages

The Research Project

SolBridge International School of Business
Winter 2015

China's Devaluation of Yuan Slams U.S. Stocks (Aug 11 2015, 1:21 pm ET)

NEW YORK -- China's 2 percent devaluation of the yuan on Tuesday pushed the U.S. dollar higher and hit Wall Street and other global equity markets as it raised fears of a new round of currency wars and fed worries about slowing Chinese economic growth.
U.S. stock indices dropped more than 1 percent and stocks also fell in Asia and Europe as investors contemplated the ...view middle of the document...

China's move, which the central bank described as a "one-off depreciation" based on a new way of managing the exchange rate that better reflected market forces, triggered the yuan's biggest fall since 1994, pushing it to its weakest against the U.S. dollar in almost three years.
In a potentially worrisome sign, China's offshore yuan , a more liquid instrument traded out of Hong Kong, fell 2.9 percent, exceeding the fall in the onshore yuan. It suggests more possible losses for the onshore currency, as the Hong Kong-traded yuan tends to act as a precursor to the onshore.

The summary of article:
China coped with structural economic problem in August 2015, in an effort to maintain economic growth by stimulating export, China’s central bank decided to devalue its currency-Yuan (Renminbi). This yuan devaluation had a negative effect on Chinese stock markets as well as global equity markets, covering Asia, Europe and especially U.S financial markets as stock prices, shares and stock market indexes like DJIA or S&P 500 all decreased because of fears of slowing Chinese economic growth. This recession of economy also reduced sales of multinational companies operating in Chinese market, its main...

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