ANKARA
The People’s Bank of China (PBoC) cut its reference rate for the renminbi for third concecutive day on Thursday while global markets were trying to digest first two devaluation moves.
The renminbi's central parity rate was set to 6.4010 to the dollar, a decrease of 1.11 percent from the previous day. The currency has since fallen to about 6.4066, its lowest level in four years.
On Tuesday the central bank cut the rate by 1.9 percent and then by1.6 percent on Wednesday.
In a note published on Tuesday, the PBoC said that the move was intended to bring the currency closer to trading under "market forces." The central bank sets a rate for the renminbi against the dollar every morning, and then allows it to trade within a 2 percent band.
Analysts saw the move as a means to stabilize the Chinese economy, as growth slows.
"We have been arguing for a while now that China needs a weaker currency. The yuan is expensive and the real lending rate is exorbitant. The Chinese economy is unbalanced and its debt levels have surged at an alarming pace," commented Shweta Singh, an economist with Lombard Street Research in a note on Wednesday. A weaker renminbi makes it easier to service outstanding debt.
On Tuesday, the International Monetary Fund published a note welcoming the new monetary policy. The devaluations could help to bring the Chinese currency into the IMF's Special Drawing Rights, which is based on a basket of major currencies. Inclusion would be an important step in the internationalization of the renminbi.
