The Chinese central bank has devalued the yuan by almost 2%, its lowest rate against the dollar in almost three years.
The bank said the move was a “one-off depreciation” of 1.9%, which triggered the biggest one-day loss in 20 years.
The move is the latest in a string of changes by the Chinese authorities to stimulate the volatile stock market. Over the weekend, China reported exports figures at a six year low, falling 8.3% in July, far worse than expected.
The midpoint for the yuan is now set at 6.2298 to $1, up from 6.1162 yuan on Monday. The People’s Bank of China usually manages the rate through this midpoint, which is has previously been determined by themselves. From now on the midpoint will be calculated by overnight market developments in order to make it more market based.
The move has hit the FTSE 100 this morning, which was down 0.6% before opening.
Burberry (LON:BRBY) was the top faller in the wake of the Chinese news, falling 2.2%. The devaluation will affect the cost of imports, from which the company heavily relies.