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China cuts yuan rate against US dollar for second day

China cuts yuan rate against US dollar for second day Shanghai, Aug 12 (AFP) China cut the yuan’s value against the dollar for the second consecutive day today, roiling global financial markets and driving expectations the currency could be set for further falls.

The daily reference rate that sets the value of the Chinese currency against the greenback was cut by 1.62 per cent to 6.3306 yuan, from 6.2298 the previous day, the People’s Bank of China (PBoC) said in a statement on its website.

The move took the reductions to 3.5 per cent this week — the largest in more than two decades — after a surprise cut yesterday, but the central bank played down expectations it would continue to depreciate the currency.

The combined drop is the biggest since China set up its modern foreign exchange system in 1994. It is also a bigger change than the 2.1 percent rise when China unpegged the yuan, also known as the renminbi (RMB), from the dollar in 2005.

The move has been widely viewed as a way to help boost exports by making them more competitive as growth slows, although China’s central bank described it as part of reforms to make its exchange rate system more market-oriented.

The cuts have jolted global share and commodity markets, with jitters spreading today as investors fretted over the possible impact on economies closely tied to the Asian giant.

Chinese authorities maintain strict controls on the currency, but they have made repeated pledges to liberalise the rules. The central bank described yesterday’s cut as a one-off depreciation.

The US government, long a critic of China’s rigid currency regime, offered a mild response saying it was too early to judge the move, despite previous comments by officials that the yuan is undervalued.

Today’s fix was even lower than yesterday’s close of 6.3232 yuan to the dollar, and the unit weakened further on the domestic market to 6.4230.