Article Highlights

  • PBOC announced yuan devaluation, says it’s a “one-off” move
  • Australia’s NAB business confidence down from 8 to 4 in July
  • German and euro zone ZEW figures due today
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Surprise, surprise! Folks over at the Chinese central bank decided to adjust its yuan forex range against the dollar lower by almost 2% in what it claims to be a “one-off” move. In their official statement, the PBOC said that it merely made changes in the formula for calculating its mid-point for the yuan’s fixed trading range.

Of course some forex analysts were quick to point out that this was probably a reaction to the recently released downbeat trade figures from China, which reflected a huge drop in exports. This suggests that further devaluation efforts might come into play, as the statement also indicated that the “market will play a bigger role in exchange rate determination to facilitate the balancing of international payments.”

This announcement spurred a sharp dollar rally in the Asian trading session, with the Australian dollar chalking up the largest losses caused also by the fall in the country’s NAB business confidence index from 8 to 4 in July. AUD/USD is down 75 pips (-1.02%), NZD/USD is down 57 pips (-0.87%), and EUR/USD is down 34 pips (-0.30%).

Euro pairs could enjoy a bit more volatility with the release of the German and euro zone ZEW economic sentiment figures in the London trading session. The German ZEW index is slated to climb from 29.7 to 31.7 while the euro zone ZEW could see an improvement from 42.7 to 43.9, reflecting stronger optimism in the region. Aside from these releases, updates on the Greek bailout could continue to keep the shared currency afloat since creditors are hopeful that a deal could be reached within the week. Stay tuned!

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