China devalues its ‘Yuan’

Lowest in the last 5 years

Beijing/Washington, Dt.30 (News agency) – Just as the G-7 summit, held recently in Japan, concluded by proclaiming an end to the currency war, China declared the devaluation of its currency the ‘Yuan’.Janet Yellen

In the week of the summit itself, the Chief of the U.S. Federal Reserve, Mr. Janet Yellen signalled the hiking of interest rates. Thus the financial experts guess that the devaluation of the ‘Yuan’ by China is in context to this dialogue of the U.S Federal Reserve.

China’s Central bank the ‘Peoples Bank of China ‘has declared the devaluation of the Yuan against the U.S. dollar.The People’s Bank of China valued the ‘Yuan’ at 6.5784 to One dollar, down by 0.45 percent less than the previous week. This level is the lowest since February 2011.

Even in August last year, China had shocked the global financial economy by announcing the sudden devaluation of the Yuan, but later on had agreed to stabilize the Yuan exchange rate as per the global market trends. Owing to the discrepancies in the Yuan exchange rates and the resulting financial instability, many businessmen in China had been shifting their investments outside of China.

The implications of the decision to devaluate the Yuan that was taken in August last year, started to show at the beginning of the year 2016, when the Yuan devaluated even further. In order to control the slipping devaluation of the Yuan, the Central Bank of China had to pump in huge investments into the economy. The recurrence of a similar situation has been noticed in the last three days, wherein gathered information shows that the Central Bank has had to make an additional amount of 110 billion Yuan available to its economy.

china 'Yuan' dollarsThe analysts claim that the recent devaluation of the Yuan is linked to the U.S. Federal Reserve Chief’s comment of hike in interest rates in America. They also add that this is indicates the further strengthening of the dollar,which may adversely impact the currency of other countries too.

Seven pivotal economies had strongly pledged against the currency war during the G-7 summit, thus China’s sudden decision of devaluation was viewed with criticism by them, and they have shown disapproval of China’s actions. They alleged during the summit, that China is taking defensive steps for safeguarding its own currency and economy.During the same summit China was also condemned for the South China Sea issue.

China has surprised and rocked the international financial economy by announcing the devaluation of the Yuan. This decision by China is being viewed as a consequence of the comments made in the G-7 summit.