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Gabrielle Easter



Yuan devaluation has knock-on effects

The devaluation of the yuan against the US dollar has put global markets in to a spin, depreciating the Australian dollar, New Zealand dollar and Korean won

Yuan devaluation has knock-on effects

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China’s central bank devalued the yuan against the US dollar on Tuesday in its biggest one-day fall since 1994, follower by a further devaluation on Wednesday, reports BBC News.

Dropping almost 2 per cent to Rmb6.2298 per US dollar, the devaluation had a knock-on effect for the Australia dollar, falling to a six-year low, as well as the New Zealand dollar and the Korean won.

The move is expected to aid China’s exports, which dropped 8.3 per cent in July as a result of weakened demand from the US, Europe and Japan.

BBC economics editor Robert Peston said the move would global ramifications in the short- and long-term.

“Immediately it will increase the competitiveness of China's exports at a time when the country's economy is growing at its slowest rate for six years - and when many economists fear that the slowdown will become much more painful and acute,” Peston said. “And for all the spur to growth it may give, the devaluation will reawaken concerns that Beijing is still a million miles from having re-engineered the Chinese economy to deliver more balanced growth based on stronger domestic consumer demand.”

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