This week we saw The People's Bank of China (PBOC) devalue the Yuan for Tuesday's trading that was 1.9 percent below Monday's level, and the biggest one-day change in a decade, which lead to the decline of the Yuan to 1.3 percent just after the start of trading. For the past three consecutive days the Yuan has been dropping in value.
A depreciated Yuan will boost China's exports, making it very affordable and making imports become very expensive, this will lead to a high demand for the country's product.
This is one reason why Asian currencies have sold off sharply after the PBOC's devaluation announcement.
THE EFFECT IN SUMMARY BELOW:
(1) A decline in Yuan will lead to other countries devaluing their currencies.
(2) China's impact on U.S growth will be small.
(3) The Federal Reserve is likely to delay rate hake.
(4) Further weakening of the Chinese economy if corrective measures are not put in place.
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