Liv­ing with a chang­ing fi­nan­cial land­scape and a weak­ened yuan

The China Post - - COMMENTARY - BY YAS­MINE YAHYA

There was an un­mis­tak­able air of alarm on Wed­nes­day as the Sin­ga­pore dol­lar fell to its weak­est level against the green­back in more than five years while shares took their big­gest one-day dive since 2011.

The trig­ger was the move by main­land Chi­nese reg­u­la­tors to de­value the yuan.

The first came on Tues­day, with main­land China’s cen­tral bank say­ing the de­val­u­a­tion was aimed at loos­en­ing its grip, giv­ing the yuan a more mar­ket­de­ter­mined ex­change rate.

But the mar­kets in­ter­preted the move, to­gether with Wed­nes­day’s sec­ond de­val­u­a­tion, as a sign that main­land China needs a cheaper yuan to boost flag­ging ex­ports and rev up a soft­en­ing econ­omy.

As a close trad­ing part­ner of main­land China’s, Sin­ga­pore has seen in­vestors selling down the lo­cal cur­rency and shares.

The yuan it­self dropped sharply to a four-year low against the U.S. dol­lar on Wed­nes­day, but has re­cov­ered some ground.

Main­land China’s de­ci­sion yesterday to de­value the yuan a third time, but only marginally, sig­naled that the reg­u­la­tors will en­sure a con­trolled de­pre­ci­a­tion.

Fur­ther­more, the coun­try’s cen­tral bank said yesterday that it will step in to con­trol large fluc­tu­a­tions in the cur­rency.

This so-called man­aged de­val­u­a­tion may also be de­signed to help main­land China gain en­try to the In­ter­na­tional Mon­e­tary Fund’s Spe­cial Draw­ing Rights bas­ket of cur­ren­cies, which would be­stow re­serve cur­rency sta­tus on the yuan, observers say.

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