Trading suspended as China weakens currency

Photo: Japanexperterna.se

Trading on China’s market was suspended today for the second time this week, as the country’s currency continues to weaken.

Shares in China fell 7 per cent today, a drop that automatically triggered an anti-panic-selling measure that ceases trading. All this occurred in just half an hour of trading, reports the BBC, making it the country’s shortest day of trading in history.

What caused the panic? The country weakening its currency once again, something that has done little to ease nerves surrouding the possibility of a wider currency war.

China’s economic growth is now at under 7 per cent, with services data released this week at a 17-month low. In response, the country is keen to rekindle its export industries, setting the yuan at 6.5646 to the US dollar (almost a five-year low) to make goods more affordable to those overseas.

All this uncertainty has ramifications elsewhere. Oil prices fell to below $35 ($35.88) a barrel for the first time in 11 years this week, falling even further to $32.62 today, fuelled by the turmoil in China.

Brent crude oil prices could go as low as $30 in the next 10 days, Nomura Holdings Inc. tells Bloomberg.

The ripples of China’s financial woes may sound inconsequential to property investors in other markets, but they can still be felt around the world. Today in the UK, Chancellor George Osborne is warning that the UK economy is facing a “dangerous cocktail” of threats from overseas, including the country’s economic slowdown, lowering oil prices and conflict in the Middle East, which could also weigh on the pound, in addition to concerns about a possible UK exit from the European Union.

“We are only seven days into the New Year, and already we’ve had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia,” he is expected to say in a speech in Cardiff.

“Yes, the British economy has performed better than almost anyone dared to hope. And as an issue, the economy has slipped down the list of many people’s everyday concerns. But the biggest risk is that people think that it’s ‘job done’.”

According to Deutsche Bank, the pound is likely to weaken in 2016, particularly against the strengthening US dollar, as the American Federal Reserve Bank has already raised interest rates and the UK is hesitating to follow suit amid uncertainty.

“The multi-year strong USD cycle should extend for at least another 2 years, with a further 10% appreciation in the real broad USD TWI… G10 currencies that have come through this relatively unscathed include the GBP and the CHF, that are both seen as overvalued by most longer-term (PPP, FEER, and BEER metrics).”

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