16:50 | 12/08/2015 Global Economy
China has allowed the value of its yuan currency to drop for a second consecutive day, doubling down on a surprise move that rattled global markets and could raise tensions with its trade competitors.
FILE - Chinese one-yuan coins placed on 100-yuan banknotes.
The yuan's market rate fell 1.6 percent Wednesday after falling nearly 2 percent a day earlier, which was its biggest single-day drop in a decade.
China's central bank, which strictly controls the currency, described the move as temporary and meant to make the value of the yuan more market-oriented.
"Looking at the international and domestic economic situation, currently there is no basis for a sustained depreciation trend for the yuan," the bank said Wednesday.
Investors in Asia reacted negatively Wednesday, with stocks trading lower in Hong Kong, Shanghai and Tokyo. Major stock market indexes in the U.S. and Europe were also down Tuesday.
The move received a cautious reaction in the U.S., which has long accused Beijing of keeping the value of its currency low to give Chinese exporters an unfair advantage.
U.S. Senator Charles Schumer, a longtime critic of China's monetary policy, said the move is further evidence Beijing is artificially devaluing its currency.
A U.S. Treasury statement said it is too soon to determine the move's implications.
The International Monetary Fund was more optimistic, saying the devaluation "appears to be a welcome step."
"The exact impact will depend on how the new mechanism is implemented in practice," said the IMF. "Greater exchange rate flexibility is important for China as it strives to give market forces a decisive role in the economy and is rapidly integrating into global financial markets."
China’s currency is tightly controlled by the government and allowed to fluctuate 2 percent above or below a central point set daily by the People's Bank of China (PBOC).
The change follows slumping exports and stock market turmoil in the world’s second-largest economy. Analyst Gus Faucher of PNC Bank says the change in currency exchange policy is likely to “support growth in China.”/.