Today, 12/5/2016, over the course of approximately 3 hours, from EST 11:40 a.m. to 2:50 p.m., the Chinese Renminbi (RMB) underwent a rapid devaluation rising from ¥6.88 to ¥7.48 against the US dollar, a loss of just under 8%. This represents a 9-year low for the Chinese yuan, and a precipitous fall amidst an already downward trend in value after a peak in value at just over ¥6.0 in 2014. Such a marked loss could spell trouble for investors.
A marked fluctuation of this degree could lead to trouble in a market that has already been rocked this year with instability due to populist-driven events, namely the vote for the Brexit and the US presidential election. This would not be the first time that the Chinese government has devalued the Renminbi unannounced, as it did on August 11, 2015, but, given the events of the last six months, one must question the rationale for the timing of such a devaluation if it was indeed planned. In the past, the Chinese government has been accused by the West of purposefully weakening its currency. Such actions are seen as an effort to maintain a competitive edge in the global marketplace as Chinese wages continue to rise.
Note: XE has now confirmed that this is not an error.
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