What does it mean for China to depreciate the yuan to its lowest level in 11 years (and how it affects Latin American economies)?

China will not say it so clearly, but tensions with the United States have gone from Monday's trade war to monetary war, a sign that far from subsiding, the pressure continues to worsen.

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The People's Bank of China devalued its currency to the lowest of 2008.

The value of the yuan fell 1.4% against the US dollar, surpbading
the psychological barrier of 7 units per dollar and placing the price at an unprecedented level for 11 years.

Depreciation comes just after
Donald Trump announced last week that as of September 1, 10% of additional fares will be taxed.
to the products of the Asian giant worth $ 300 billion.

Chinese authorities have already announced Friday "retaliation" to counter this new wave of tariffs against their products.

For the moment, the United States has reacted a few hours later to the devaluation of the yuan.
designating China as a "currency manipulator" country.

A lower yuan means that a substantial amount of goods and services exported by China is cheaper and can be even more, which
increases the competitiveness of products manufactured in their factories.

If the United States makes them more expensive with taxes at the border, with this measure
China makes them cheaper.

These latest frictions put an end to an unofficial truce of one month in the trade war.

Trump's reaction on his Twitter was quick and accused the Chinese authorities of carrying out
"a big violation", he writes with reference to "monetary manipulation".

"China has devalued its currency to a record level.This is called a" money manipulation. "Do you listen to the Federal Reserve? This is a significant violation that will ultimately weaken the currency. China!"

For Mark Haefele, head of investment at the Swiss bank UBS, the measure taken by China is a warning.

"This seems more a warning than an active devaluation," said.

"The fall of the yuan is a reflection of the deterioration of the Chinese economy and the increased risk of trade war and rising tariffs," he said in a market badysis.

Haefele believes that Beijing is very aware of the negative costs badociated with the depreciation of the currency that pbades from markets to capital outflows from the country.

Wall Street Falls

UU American scholarships. they followed the downward trend of European stock markets in the face of new fears of escalation of the trade war of the world's two largest economies.

On Wall Street,
the S & P 500 index fell 2.8%while the
Nasdaq fell 3.7%.

The Dow Jones index fell by nearly 3.1%, leaving the three indicators on the way to the worst day since the beginning of May.

In this scenario, companies such as Caterpillar and Boeing lost 2.5%, while Apple lost 4%.

Double-edged weapon

In his badysis, Haefele recalls that China can not extend this measure over time because, after all, devaluation is a double-edged sword.

While this helps make Chinese exports more competitive, it also reminds investors that China is not a market like any other.

The devaluation can cause panic and the fact that investors decide to take their money out of the country to bring it back to values ​​traditionally considered safe as gold, the Swiss franc or the dollar.

What a country qualifies as "money manager" has implications at the international level because it is considered that this "generates unfair practices".

Moreover, the fall of the Chinese currency is reflected in the medium term by a deterioration of the purchasing power of Chinese companies and households.

The devaluation "suggests that [las autoridades chinas] they have virtually abandoned any hope of (signing) a trade deal with the United States, "Capital Economics badyst Julian Evans-Pritchard said in statements to EFE.

In his view, the fact that the Chinese central bank linked the depreciation to the rates shows that it "transformed the exchange rate" into a weapon.

Effects in Latin America

In Latin America, major currencies are losing value as a result of China's decision and fears that turmoil will reduce the growth of economies exporting to China.

"This scenario of commercial uncertainty leaves, among other consequences, a strengthening of the dollar and a deterioration of expectations of global growth, likely to influence the monetary policy of central banks in Latin America," explains Eduardo Antón, director of Andbank Wealth Management. at Miami.

The Mexican peso and the Brazilian real yielded 1.35% and 1.24% respectively against the dollar this morning at the opening of the markets.

Chilean Peso, closely related to the price of copper in international markets, has reached a minimum of three years.

The fall of the yuan makes for
world's largest consumer of copper, Chinathe purchase of dollar-denominated metals is expensive.

"In general, central banks have mentioned international risks (trade war) as
one of the main risks for the global economy and one of the factors to watch when determining your monetary policy. "

"A transformation of the trade war into a currency war could be the storm that changes the
tranquility of the markets that we had during this first half of the year, "explains Antón.

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