US Dollar, Stocks and Market Currencies Under Pressure as Yuan Drops Again
The US dollar, stocks and emerging market currencies around the world are under pressure for the second time after China’s yuan weakened once again just a day after China devalued its currency. By late afternoon major Wall Street averages have pared losses, but Apple and energy shares changed direction to trade higher.
Dow Jones industrial average also fell by 0.33 points barely changed at 17,402.51, S&P 500 rose 1.98 points to 2,086.05 and Nasdaq Composite added 7.59 points to 5,044.39. the US dollar weakened against most of the major currencies, as US debt yield lower as investors questioned if China’s devaluation of its yuan will affect the Federal Reserve’s plans in raising interest rates later on. Meanwhile US Treasury debt prices increased with yields on benchmark 10 year notes surpassing a three month low. The gains were pared as stocked slowly recovered but with a yield of 2.15 percent just even compared to the previous day.
The dollar was able to recover some of the losses that day, although it was still down against other currencies. The Euro rose to 1.1 percent surpassing the $1.11 for the first time and the US dollar fell 0.7 percent against the yen to 124.19 yen. The value of the yuan fell an additional 1.6 percent continuing a dramatic slide that is prompted by the Central Bank cut on its reference rate against the US dollar. The People’s Bank of China reduced the reference rate to 6.3306 yuan per dollar following a reduction of 1.86 percent the largest single day drop in years.
The yuan onshore trading price declined by 2 percent to four year low of 6.4465 based on the China Foreign Exchange Trade System. Whether the currency will rise or fall is determined by the market. The bank stated that it will basing the rate on a market maker quote system that takes on consideration the previous trading day closing price and the movements on the world’s major currencies and the demand and supply of the yuan in the market.