12 Aug 2015

Kiwi tumbles after surprise Yuan devaluation

11:29 am on 12 August 2015

The New Zealand dollar has fallen after China's central bank surprised markets by devaluing the Yuan by nearly 2 percent yesterday.

Yuan or Renminbi notes.

Yuan or Renminbi notes. Photo: AFP

At 10:30am, it was at 65.5 US cents, down from its fall by about three-quarters of a cent against its American counterpart to 65.6 US cents yesterday afternoon, pulling it closer to a six-year low of 64.9 US cents set last week.

ANZ Bank senior foreign exchange strategist Sam Tuck said the change came after weak economic data from the world's second largest economy.

"A devaluation is not positive news... and also the purchasing power of China is going down as the renminbi declines, so less money to spend on New Zealand and Australian exports," he said.

China's main lender manages the rate through the official midpoint, from which it can rise or fall 2 percent on any given day.

Until now, it had been determined solely by the central bank itself.

Making the rate more market-based would mean the midpoint was instead based on how the currency finished the previous trading day.

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