Currencies
Yuan Devaluation Debate Surfaces as Traders Weigh Next FX Shock
- Supporters say sharp currency drop can help China’s economy
- But such a move is controversial as it can trigger outflows
The yuan hovers near the weakest it’s allowed to move against the dollar.
Photographer: Lam Yik/BloombergThis article is for subscribers only.
There is quiet yet mounting speculation in financial markets that China will need to take an extreme and highly controversial measure to support its moribund economy — devalue the yuan in a big-bang move.
Supporters of a sharp currency depreciation say it would allow Beijing boost exports and give the central bank room to cut interest rates. Doubters argue it would only lead to a feedback loop of capital outflows and further yuan declines with the potential to destabilize the global currency market.