PBOC's Devaluation Of Yuan: A Move Towards 'More Market Based Fixing System'?

The U.S. equity market slumped heavily for a second day on a row as an effect of China further devaluing its currency by 1% on Wednesday. On Tuesday, the Chinese central bank, People's Bank of China had devalued the Yuan by 1.9% against the U.S. dollar.
Mike Moran, Standard Chartered Bank Senior Currency Strategist, was on CNBC recently to discuss this devaluation.

More Market Based Fixing System

"There's two points I really want to make very clear," Moran began. "Number one, I think, this change in the fixed mechanism at the PBOC (People's Bank of China) A, reflects a more market based fixing system. This has been a criticism from IMF most recently in the staff paper, treasury - U.S. treasury has also been critical and they have been pushing China towards a more market focused one."

Lot Of Uncertainty

He continued, "That's what we got, it's caused a lot of anxiety, a lot of uncertainty. How is this fix now going to be a calculated? How is this going to affect the onshore market and obviously the other Asian currency markets more broadly? So, I think, that's what we are seeing, a lot of uncertainty."

"We have only had one data point, we have just had the overnight fix. And the fix came out largely as the PBOC had described it would, it was going to be driven by the close of the onshore market the night before, plus a little give or take depending on that," Moran concluded.