China's yuan plunges nearly 2pc again, sparking fears of currency war in region

China's yuan weakened further at the open today, after the central bank startled markets on Tuesday by pushing the yuan down nearly 2 per cent through an aggressively weaker guidance rate.

The People's Bank of China, the country's central bank, trimmed the reference rate - the daily fix that sets the value of the Chinese currency against the greenback - by 1.62 per cent. It set the midpoint rate at 6.3306 per US dollar prior to market open, sharply weaker than the previous fix of 6.2298, a day after the unit was devalued by nearly 2 per cent.

Wednesday's fix was even lower than Tuesday's close of 6.3232 yuan to the dollar.

Asian currencies tumbled for a second day amid concern the yuan's weakening will reignite a currency war in the region.

Tuesday's devaluation, the biggest since 2005 when China unpegged the yuan, also known as the renminbi (RMB) from the dollar, raised worries over the health of the world's second-largest economy.

The action was widely viewed as way to help boost exports by making them more competitive as economic growth slows, although China's central bank described it as a one-off move to reform its exchange rate system.

Previously, Chinese authorities based the fixing on a poll of market-makers, but the PBOC said on Tuesday that they would now also take into account the previous day's close, foreign exchange supply and demand and the rates of major currencies.

Source: scmp.com