Asian markets are weighed down by intensifying worry over currency war. China devalued its currency again today by setting the daily midpoint reference to 6.3306 per dollar. Spot yuan dropped even further as low as 6.44 per dollar and hit the lowest level since 2011. Nikkei lost -320 pts or -1.55% while HK HSI dropped -490 pts or -2%. That followed lower close in US with DJIA down -212 pts, or -1.21%. In the currency markets, Australian dollar suffered most and breached recent support of 0.7233 against the greenback. New Zealand dollar follows as the second weakest major currency. Meanwhile, dollar is generally weak against others on talk that China's devaluation of yuan could delay Fed's rate hike. The dollar index is trading back below 97 handle for the moment. In other markets, crude oil extended recent down trend and breached 42 handle. Gold rides on weakness in dollar and is back above 1100.
While the markets response negatively to China's devaluation, the International Monetary Fund welcomed the move. IMF said in a statement that "the new mechanism for determining the central parity of the Renminbi announced by the PBC appears a welcome step as it should allow market forces to have a greater role in determining the exchange rate." And, "the exact impact will depend on how the new mechanism is implemented in practice." Meanwhile, IMF also assured that China's change has "no direct implications for the criteria used in determining the composition of the basket." And, "more market-determined exchange rate would facilitate SDR operations in case the Renminbi were included in the currency basket going forward."
On the data front, Japan industrial production was finalized at 1.1% mom in June. Tertiary industry index rose 0.3% mom in June. Domestic CGPI dropped -3.0% yoy in July. Australia Westpac consumer confidence rose 7.8% in August while wage cost index rose 0.6% qoq in Q2. China industrial production rose 6.0% yoy in July versus expectation of 6.6% yoy. Retail sales rose 10.5% yoy and fixed assets investment rose 11.2% yoy. All mixed expectations. UK job data will be the main focus in European session. Eurozone will release industrial production and Swiss will release ZEW expectations.