5 THINGS YOU DON'T WANT TO BELIEVE ABOUT CHINA LABOUR MARKET
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The People's Bank of China allowed the yuan to depreciate by nearly 2% against the U.S. dollar on Tuesday, the result of a surprise policy change that roiled international currency markets.
The central bank said it had decided to allow market forces greater control over the yuan, and announced a major change in how the currency's daily "fix" or "midpoint" will be calculated.
The sudden devaluation is the largest in two decades, and comes amid a period of slower economic growth and increased stock market volatility in China. The move, announced before the market open on Tuesday, quickly rippled through global currency markets, sparking questions over Beijing's timing and intentions.
The PBOC typically sets a daily midpoint for the yuan, around which the currency is allowed to trade within a 2% band. Until now, the central bank had total control over where the midpoint was set. Going forward, the midpoint will be based on the previous day's closing price.
The policy change necessitated a one-time yuan devaluation of 1.9%, the bank said, because the midpoint had been diverging from the market rate for some time.
"[Because] China is maintaining a relatively large trade surplus, [the yuan's] real effective exchange rate is relatively strong, which is not entirely consistent with market expectations," the bank said in a statement.
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The People's Bank of China allowed the yuan to depreciate by nearly 2% against the U.S. dollar on Tuesday, the result of a surprise policy change that roiled international currency markets.
The central bank said it had decided to allow market forces greater control over the yuan, and announced a major change in how the currency's daily "fix" or "midpoint" will be calculated.
The sudden devaluation is the largest in two decades, and comes amid a period of slower economic growth and increased stock market volatility in China. The move, announced before the market open on Tuesday, quickly rippled through global currency markets, sparking questions over Beijing's timing and intentions.
The PBOC typically sets a daily midpoint for the yuan, around which the currency is allowed to trade within a 2% band. Until now, the central bank had total control over where the midpoint was set. Going forward, the midpoint will be based on the previous day's closing price.
The policy change necessitated a one-time yuan devaluation of 1.9%, the bank said, because the midpoint had been diverging from the market rate for some time.
"[Because] China is maintaining a relatively large trade surplus, [the yuan's] real effective exchange rate is relatively strong, which is not entirely consistent with market expectations," the bank said in a statement.
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