The Yuan is pegged to the US Dollar within a band.
As the US Dollar gains strenght and Chinese competitiveness declines – it was just a matter of time that China intervened on its currency.
And naturally it has done that with a bang…the over the counter USDCNY plunged the most since Lehman crash!
The devaluation has been approx -1.9% (April 2013).
These has two meaning ….the Chinese are forecasting a FED rate increase in September (and further USD strengthening) and also that Chinese issues are much bigger than the world thinks.
There are also quite a lot of consequences from internal (Chinese deflation and Chinese corporate debt being the largest) and external (how the other regional reserve banks, mainly Bank of Japan and Bank of Korea).
Another extremely complex piece of the puzzle to take into considerations.
Update.
What a splash.
All luxury brand (BMW etc ), airlines, which came to rely on the Chinese consumer got it really badly.
Practically everything imported became more expensive for Chinese and this will hit particularly hard all Asia including Australia.
The major beneficiaries are naturally Chinese exporters, specially in the technology sector
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