Global Markets Turmoil After China Extends Currency War To 2nd Day - Devalues Yuan To 4 Year Lows

Chinese stocks opened lower, extending yesterday's losses, after The PBOC weakened its Yuan FIX dramatically for the 2nd consecutive day (from 6.1162 Monday to 6.2298 last night to 6.3306). Offshore Yuan fell another 9 handles against the USD after China closed but was hovering at 6.40 as the market opens (now at 11 hnadles weaker at 6.51). Bear in mind the utter devastation in Chinese credit markets that data showed occurred in July, it remains ironic that for the 3rd days in a row, Chinese margin debt balances grew. Before the real fun and games started, Chinese officials once again exclaimed that their data is real (denying any mismatches between GDP Deflator and CPI) as China CDS spiked to 2 year highs. US equity futures are tumbling, bonds bid, and gold bouncing off the initial jerk lower.

PBOC makes some comments (like last night's)…

*PBOC SAYS NO ECONOMIC BASIS FOR YUAN'S CONSTANT DEVALUATION

*PBOC SAYS YUAN WON'T CONTINUOUSLY DEVALUE

*PBOC SAYS MOVE OF YUAN REFERENCE PRICE IS NORMAL

*CHINA YUAN MECHANISM CHANGE MAKES FIXING RATES MORE REASONABLE

And then there is this (from Xinhua):

China's state-owned news 4-year lowsagency Xinhua said: “China is not waging a currency war; merely fixing a discrepancy.”

“The central parity rate revision was designed to make the yuan more market-driven and in line with market expectations,” it said in a comment piece published on its web site.

“The lower exchange rate was just a byproduct, not the goal.”

The “one-off” adjustment has now become two… some context for the size of this move…

*MNI: CHINA PBOC WED YUAN FIXING LOWEST SINCE OCT 11, 2012

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