China’s renminbi fell to its lowest level against the US dollar for 11 years during August. The drop provoked US President Donald Trump into claiming that China was manipulating its currency, describing the renminbi’s devaluation as a “major violation” and suggesting that China was deliberately trying to soften the impact of higher US tariffs.
- India’s central bank cut its key interest rate for a fourth straight month
- Brazil avoided falling into recession in Q2
- Argentina’s credit rating was downgraded by S&P and Fitch
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China’s renminbi fell to its lowest level against the US dollar for 11 years during August. The drop provoked US President Donald Trump into claiming that China was manipulating its currency, describing the renminbi’s devaluation as a “major violation” and suggesting that China was deliberately trying to soften the impact of higher US tariffs. A weaker renminbi reduces the cost of China’s exports, making them more attractive to overseas customers. The People’s Bank of China (PBoC) rejected the accusation, however, insisting that its currency was “at an appropriate level” with China’s economic fundamentals and with market supply and demand. China warned that it would take “necessary countermeasures” against the US tariff increases and, as the US increased levies on Chinese imports to the US, China announced that it intended to raise tariffs on US$75 billion-worth of US imports to China.
“China’s exports posted an unexpected increase in July”
China was supplanted as the US’s principal trading partner by Mexico and Canada during the first half of 2019. Nevertheless, China’s exports posted an unexpected increase in July, rising at an annualised rate of 3.3% during the month while imports dropped by 5.6%. Meanwhile, annualised growth in China’s industrial production slowed sharply in July, falling from 6.3% in June to 4.8%. The Shanghai Composite Index fell by 1.6% over August as a whole.
In a move designed to kick-start lacklustre economic growth, the Reserve Bank of India (RBI) cut its key interest rate by 35 basis points from 5.75% to 5.40% during August. This was the central bank’s fourth consecutive cut this year, and its largest move for some time; the previous three cuts were of 25 basis points each. The RBI also trimmed its forecast for India’s economic growth in the current fiscal year from 7% to 6.9%. The benchmark CNX Nifty Index fell by 0.9% during August.
Having contracted in the first three months of 2019, Brazil’s economy managed to avoid recession in the second quarter, posting quarter-on-quarter growth of 0.4%. Industrial production rallied during the period, and construction and fixed investment also provided a positive contribution. On an annualised basis, the country’s economy expanded by 1%. The Bovespa Index ended August 0.7% lower.
Elsewhere in Latin America, amid mounting concerns over Argentina’s liquidity position and the possibility of default, credit ratings agencies Standard & Poor’s (S&P) and Fitch subsequently downgraded their ratings for the country’s debt.
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