Fears for future global demand have once again been stoked by China’s Central bank artificially devaluing the Yuan for a second day in a row.
The post below identified that the record 1.9% reduction in value yesterday for China’s currency had significant ramifications across global markets. But this significance was rather a matter of reach over depth.
How is this affecting the Canadian Dollar?
By attempting to devalue its currency China has announced to the world that it has concerns about its own economy, and wants to make its exports more competitive as a buffer against any further economic slowdown. This is an internal focus over its usual external habits. By lowering its currency value, products to the Chinese outside its borders become more expensive, as a result we are expecting lowered demand in 2015 for oil.
But this is why the reach is global but the affect shallow. The CAD has only weakened by about half a cent on GBP/CAD trading and similar percentage against other non-commodity currencies. Canada is not a huge exporter to China, so currencies such as the Australian Dollar were relatively much harder hit in this regard. CAD was hit indirectly by falling oil prices.
Can we expect more of the same?
The only answer is that I would not rule anything out. By devaluing their currency by 3% in a matter of days, the Chinese economy has shown how unpredictable a country can be when transparency is not their major concern. But for those with CAD to sell, rest assured that the Chinese authorities have stated this is not the start of any ‘sustained’ devaluation. So even if there are any losses, they will be slight. But if this may end up being an ongoing saga over the next few weeks so those with CAD to sell in the short term should get in contact immediately on +44 1494 787 478 for a free quote on your transfer and advice on how to maximise the value of your CAD.