The price for copper fell sharply Tuesday after China’s government lowered the value of its currency, suggesting weakness in the world’s second-largest economy.
Chart from http://www.nasdaq.com/markets/copper.aspx
Beijing’s move to weaken its currency allowed the yuan to fall by its biggest one-day margin in a decade. The central bank said the 1.9 percent fall was due to changes aimed at making the way it sets exchange rates more market-oriented. In recent months, the yuan has strengthened along with the U.S. dollar as currencies of other developing countries weakened, hurting Chinese exporters. Exports fell by 8.3 percent in July. The People’s Bank of China said market forces would be given a bigger role in setting the exchange rate, leaving open the possibility of more declines.
“Fundamentally, I still have a lot of questions. I still wouldn’t be surprised if we see copper touching $4,700 this year,” analyst Dominic Schnider of UBS Wealth Management in Hong Kong told Reuters Africa.
“In the short run, this [devaluation] is more bad news for commodity prices. A weaker Chinese currency is likely to mean weaker demand for internationally produced commodities,” said Paul Bloxham, chief economist for Australia and New Zealand at HSBC.
Economy & Markets Daily author Harry Dent point blank blasts the Chinese government. He writes, “China’s economic model is one of the most unsustainable things in the global economy today. Worse, it’s heavily contributed to a massive real estate bubble that will burst with global consequences. Its economic statistics are not real – they are purposefully overstated and then revised later, if at all.”
You can read his entire article here.
GREECE DEAL: Greece says it has reached an agreement with its international creditors on the broad terms of a new bailout deal. The news pushed up Greek markets, with the stock index up 1 percent and the 2-year bond yield sliding over 4 percentage points, an indication investors are less worried about a default.
MORE READING: Check out Andy Home’s article on Reuters. He takes an in-depth look at supply and demand AND disruptions to the red metal.
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