China Devalues the Yuan

Beijing, CN, August 11, 2015—The central bank of China devalued its currency on Tuesday, setting its official guidance rate down nearly 2% to 6.2298 yuan per dollar.

This is the lowest point for the yuan in nearly three years.

"Since China's trade in goods continues to post relatively large surpluses, the yuan's real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations," the central bank said. "Therefore, it is necessary to further improve the yuan's midpoint pricing to meet the needs of the market."

The devaluation followed weekend data that showed China's exports tumbled 8.3% in July, hit by weaker demand from Europe, the United States and Japan, and that producer prices were well into their fourth year of deflation, according to Reuters. While a weaker yuan will not cure all the ills of China's exporters, it would help relieve deflationary pressure, a far bigger economic concern in the view of some economists. 

Devaluation of the yuan is a benefit to exports and a barrier to imports.