China's Central Bank has again cut
the guiding rate for the national currency, the yuan, a day after
Tuesday's record 1.9% devaluation.
The move sent fresh shockwaves
through Asian markets, but the bank has sought to calm fears, saying it
was not the start of a sustained devaluation.
This is now the biggest two-day lowering of the yuan's rate against the dollar in more than two decades.
The commerce ministry said the lower rate would boost struggling exports.
Chinese exports fell more than 8% in July, adding to concerns the world's second largest economy is heading for a slowdown.
But the action on the yuan sparked fears of a global and destabilising "currency war". There has been criticism from the US, where markets fell sharply overnight. Read more: Asian stocks down on lower yuan Karishma Vaswani: Not why, but why now?
One-off?
On Wednesday, China's central bank fixed the "official midpoint" for the yuan down 1.6% to 6.3306 against the dollar.
The midpoint is a guiding rate, from which trade can rise or fall 2% during the day.
China has long kept tight control of their currency's value
Until Tuesday, that rate had
been determined solely by the People's Bank of China (PBOC) itself. But
the rate will now be based on overnight global market developments and
how the currency finished the previous trading day.
The bank, which had called Tuesday's 1.9% cut a "one-off" adjustment, sought to reassure financial markets on Wednesday.
"Looking
at the international and domestic economic situation, currently there
is no basis for a sustained depreciation trend for the yuan," it said in
a statement.
Backing from IMF
The International Monetary Fund said the move to make the rate more market-based "appears a welcome step".
"Greater
exchange rate flexibility is important for China as it strives to give
market-forces a decisive role in the economy and is rapidly integrating
into global financial markets," the international lender said in a
statement.
"We believe that China can, and should, aim to achieve an effectively floating exchange rate system within two to three years."
The
IMF added, though, that the decision would not affects its
considerations of Beijing's hopes for the yuan to be added to the
"special drawing rights" (SDR) reserve currencies.
These are currencies which IMF members can use to make payments between themselves or to the Fund.
China has long been lobbying to have the yuan included alongside the dollar, euro, yen and the British pound.
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