Beijing lowered the reference rate for the Yuan for three days in a row, shocking global financial markets. On Thursday the PBoC set the USD/CNY fix at 6.4010, up 1.1% from the fix of 6.3306 a day earlier. Thursday was the third consecutive day that the PBoC devalued its currency, after beginning the new regime on Tuesday when the Yuan was devalued by 1.9%. The PBoC sets the reference rate for the USD/CNY every day, and allows the exchange rate to fluctuate a maximum of 2% above or below that value on any given day. The offshore yuan (CNH) often trades at a different value to the onshore yuan (CNY), but policy makers have been attempting in recent days to close the gap. The cuts have sparked concerns over a "currency war" as other countries feel pressure to devalue and raising questions about the health of the world's second biggest economy, where growth is already slowing. Analysts viewed the move as a way for China to both underpin exports by making its goods cheaper abroad and push economic reforms as it seeks to become one of the reserve currencies in the IMF's SDR group. However, the central bank dismissed the possibility that China was seeking to fuel a currency war, saying there was no need as exports were expected to increase in the second half of the year.
Euro zone
The ECB stands ready to alter its QE programme to combat unusually "low inflation" and "disappointing economic growth" in the Euro zone. ECB officials voiced fears that while inflation in the Euro area seems to have bottomed out, the region's recovery remains under threat by the Greek crisis and turmoil in emerging markets.
Japan
Minutes of the Bank of Japan's July monetary policy meeting revealed there was some disagreement on the central bank's assessment of inflation expectations. One member of the BoJ board was not convinced that inflation expectations were rising from a longer term perspective. Since the beginning of the year, consumer prices in Japan has been around zero, well below the central bank's target of 2%, fuelling speculation that the BoJ may expand its monetary easing programme this year. Meanwhile, Japanese experts are sharply downgrading their economic growth outlook for the year amid expectations that business activity contracted in the three months through June. Currently economists expect the world's third biggest economy to expand 1.21% in the year to March 2016, compared with the 1.66% growth predicted in the preceding month. The Japanese economy likely shrank an annualized 1.9% in April-June due to sluggish exports and household spending, a sharp reversal from a 3.9% expansion in the first quarter
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