News

Chinese currency devaluations create demand questions

 

China’s currency devaluation has been a big factor in commodities and the broader market this week.

The Yuan has dropped sharply this week as Beijing attempts to stimulate its economy by making Chinese goods less expensive on the global market. However, a cheaper Yuan also makes Chinese imports more expensive.

University of Illinois Agricultural Economist Darrel Good tells Brownfield the currency devaluations are creating concerns about China’s general economic health, “It does suggest their economy is slowing a bit more rapidly than what had been the expectation before. How that gets translated into purchases of agricultural commodities, I think that’s yet to be seen, but it certainly does throw some red flags.”

China is the world’s leading buyer of soybeans and has a growing population and wealth base that increasingly depends on imported goods for manufacturing, food, and other critical economic infrastructure components. The United States supplies a significant amount of the goods imported by China.

The Yuan closed lower heading into Thursday’s U.S. session.