Investing.com - Asian shares fell on Wednesday as China's central bank moved again to weaken the yuan, raising concern that other central banks in the region may respond in kind.
The Shanghai Composite fell 0.67%, while the S&P/ASX 200 eased 0.84% and the Nikkei 225 was down 1.09%.
The People's Bank of China set the yuan at 6.3306 against the dollar on Wednesday, one day after the bank announced a near-2% devaluation of the exchange rate and shift to a more market-oriented central parity system, moving it 1.61% weaker than Tuesday's fixing and the weakest since Oct. 11 2012.
That the first central parity after the Tuesday devaluation was weaker than the previous day's close suggests the PBOC may allow the yuan to continue to depreciate, though analysts have said one fixing isn't enough to call a trend and that successive days of trading will be needed to gauge the government's appetite for depreciation.
The yuan ended at 6.3231 to the dollar on Tuesday after the PBOC set the fixing at 6.2298 in the morning, marking a 1.83% rise in the dollar against the yuan relative to Monday's close and a 1.86% drop in the central parity fixing - seen as part of an effort to boost the country's trade competitiveness.
In a subsequent statement to the fixing, the PBOC said the Wednesday move was in response to July credit data and that there is no basis for continued yuan depreciation.
"After a short-term period of adjustment, yuan exchange rate volatility will tend to be more reasonable and stable," it said.
Separately, the IMF said The PBOC's new mechanism for determining the daily yuan central parity should allow market forces to do more to determine the exchange rate and so appears to be a "welcome step." However, the Fund noted the key question being asked by financial markets since the PBOC's announcement early Tuesday morning: how will the central bank
use the new mechanism to influence the exchange rate going forward?
"The exact impact (on the yuan exchange rate) will depend on how the new mechanism is implemented in practice," the IMF said in its statement.
Earlier, the Bank of Japan saw some members question the sustained impact of aggressive easing on the pace of yen weakening and inflation expectations in the Wednesday release of the July minutes of the nine-member board.
At least two members of the board sugegsted that inflation expectaions have either weakened or are lower, something BoJ Governor Haruhiko Kuroda told reporters after the July meeting that "some board members" were more cautious about their inflation outlook.
The BoJ held policy steady at its latest meeting last week with the outlook largely stable with previous forcasts for economic recovery.
At the same time, the July CGPI fell 3.0% year-on-year, above a 2.9% year-on-year drop seen and the fourth straight decline after a 2.4% fall in June.
In Australia, the Westpac-MI Consumer Sentiment at 1030 Sydney (0030 GMT). In July the index fell 3.2% to the lowest level since December last year. Then the second quarter wage price index at 1130 (0130 GMT). Expectations are for a 0.6% quarter-on-quarter rise that would keep year-on-year growth at a record low 2.3%.
Overnight, U.S. stocks plummeted on Tuesday erasing most of their gains from one day earlier, after China triggered a major sell-off throughout global markets by unexpectedly devaluing its currency earlier in the session.
On Tuesday data showed that U.S. unit labor costs rose more than expected in the second quarter, while non-farm productivity came in below forecasts.
The U.S. Bureau of Labor Statistics reported on Tuesday that unit labor costs increased by0.5% in the three months to June, above forecasts for a gain of 0.1% and following rise of 2.3% in the first quarter.
The report also said that nonfarm business sector labor productivity increased by 1.3% in the second quarter, missing expectations for a gain of 1.6%. The previous quarter’s figure was revised to a drop of 1.1% from a previously reported fall of 3.1%.