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The central bank of China has cut its daily reference rate by 1.9 percent, making its biggest downward adjustment since 1994. The People’s Bank insists Tuesday’s measures are a one-off aimed at reviving faltering exports.
The bank’s announcement prompted the yuan exchange rate to tumble against the US dollar. As of 8:15am GMT on Tuesday, the yuan (renminbi) was trading at 6.33 to the dollar, 1.9 percent lower than Monday.

Over the weekend, Beijing said July exports dropped 8.3 percent, compared to a year before. The weaker the yuan, the bigger revenues exporters get from their foreign sales.

The tough move may also indicate that Beijing is allowing the market more freedom to determine the yuan rate.

“The People’s Bank of China has astutely combined a move to weaken the yuan with a shift to a more market-determined exchange rate,” Eswar Prasad, a Cornell University professor and former China representative of the IMF told the Wall Street Journal… see more

source: usatoday

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