Why China Is Devaluing The Yuan

[video type='youtube' id='JuBKLfaefTo' height='350']

China’s central bank, People’s Bank Of China, on Tuesday devalued its currency, the yuan in a move that surprised global markets.

Before Tuesday, the bank set a midpoint for the value of the yuan against the dollar, called the daily fixing. The yuan is allowed to move 2% above or below the daily fixing in daily trading.

Now, the fixing will be much more aligned to the market. It will be based on how the yuan closes in the previous trading session.

The bank devalued the “reference rate” by almost 1.9 percent on 11th August, followed by 1.6 percent on August 12 and finally a further 1.1% on 13th. The first move on Tuesday was the biggest one-day fall in the yuan since a massive devaluation in 1994.

So why is China devaluing the yuan? Take a look at the video to find out.