Who's afraid of a falling yuan?

Australia need not be overly concerned... in fact it might be useful.

Summary: There are two views on China’s recent devaluation of its currency: That the government is trying to buttress a weakening economy, or that it’s just another step in financial market liberalisation. It’s worth remembering the currency has strengthened considerably over the last decade and is now likely headed lower still.

Key take-out: To the extent that a weaker yuan lifts Chinese growth, that is good news for Australia. But much depends on how Japan and the US react, and whether these countries respond by printing more money or leaving rates lower for longer.



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