China is mulling a 15-20 percent devaluation of its currency by the end of 2016 in a move that could spark a crisis in Asian markets, according to research firm IDEAglobal.
It cited an interview it had conducted with a “reliably-informed Asian source” in a release published late on Tuesday.
China, the world’s second-largest economy after the U.S., devalued its currency last month in a bid to help exporters. The country is grappling with a softening economy and wild swings in the stock market.
“Having achieved a 3 percent move in a few weeks, they would not want to stop here. Their ultimate target is probably a 15 to 20 percent minimum move in the trade-weighted index,” IDEAglobal cited the source as saying in an interview.
The yuan was trading at about 6.3708 per dollar on Wednesday, having weakened to four year-low around 6.45 after last month’s surprise devaluation.
According to the source, the push for a weaker yuan has to be seen in the context of sharp falls in other Asian currencies such as the Japanese yen that have given Japanese exporters a competitive edge.
The Japanese yen has shed more than 50 percent of its value against the dollar in the past three years against a backdrop of aggressive monetary stimulus from the Bank of Japan.
China’s surprise yuan devaluation last month meanwhile sparked fresh concerns about a global “currency war” – whereby countries devalue their currency in a tit-for-tat scrabble to gain a competitive edge — and unfair protection of exporters by Beijing.