Is China preparing to devalue its currency again? The fate of the market may hang on the answer…
China last devalued between December 2015 and January 2016. The result? U. S. stocks kicked off the year to their worst start ever. And that was only a 2% devaluation.
China previously devalued 4% in August 2015. That was enough to send the Dow plunging 508 points in one session – the Dow’s eighth-worst single-day crash in its history. It looked like it may have led to ‘the big one’ so many have been expecting.
But the Fed managed once again to yank another rabbit out of its hat. The day of reckoning was averted – or at least postponed.
Could the Fed pull it off again if China devalues? But why would China devalue… when the last two occasions sparked massive financial panics?
The answer: It might have to in order to defend its domestic economy…
The muscular U. S. dollar has hung China on the hooks of a dilemma. It’s true China wants a weak currency to spark its export economy. Weak, yes. But not too weak…
This post was published at Wall Street Examiner on January 16, 2017.
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