China’s yuan hit a four-year low on Wednesday, falling for a second day after authorities devalued it in a move that sparked fears of a global currency war and accusations that Beijing was giving an unfair advantage to its struggling exporters.
Spot yuan fell to 6.43 per dollar, its weakest since August 2011, after the central bank set its daily midpoint reference at 6.3306, even weaker than Tuesday’s devaluation. The currency fared worse in offshore trade, touching 6.57.
The central bank, which had described the devaluation as a one-off step to make the yuan CNY=CFXS more responsive to market forces, sought to reassure financial markets on Wednesday that it was not embarking on a steady depreciation.
“Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the yuan,” the People’s Bank of China said in a statement.
Nevertheless, a senior trader at a European bank in Shanghai said the unexpected devaluation had caused “some panic” in the markets.
“Although the central bank made explanations again today, stressing the yuan would not show sustained depreciation, the market is very jittery,” he said.
The yuan has now lost 3.5 percent in China in the last two days, and around 4.8 percent in global markets.
Other Asian currencies were also lower on Wednesday in response, with Indonesia’s rupiah IDR=ID and Malaysia’s ringgit MYR= hitting 17-year lows, and the Australian AUD=D4 and New Zealand dollars NZD=D4 at six-year lows.
Indonesia’s central bank pinned the rupiah’s fall directly on the yuan devaluation and said…