As The Chinese Stock Market Hits New Lows, So Does Its Currency

Chinese stock shares plunged in June, raising worries of a slowdown in the world’s largest commodity user. Shares bounced back after the sharp decline, but that bounce didn’t last long.

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Investors’ sentiment haven’t turned positive yet, sending Chinese stocks to fresh lows.

FXI China ishares since 2014
FXI China ishares since 2014. Graph:  MetalMiner analysis of data.

Policy makers in China are trying everything to boost the economy. Last week China unexpectedly devalued its currency. Ever since then, though, the currency has kept on depreciating against the dollar, the exchange rate is now at ~6.4 $/¥, the highest rate since 2011.

Yuan per dollar since 2011
Yuan per dollar since 2011. Graph: MetalMiner analyis of Yahoo Finance Data.

But it seems like those concerns about China’s economy have just been bolstered by the currency devaluation. It’s clear that investors are very nervous about what’s happening in China and they are taking all these measures to boost the economy as desperate attempts to stop a negative tide.

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These developments are just exacerbating the bearish commodity market and, even more significantly, industrial metals, which are suffering serious declines lately.


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