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Chinese Yuan's Value Falls as Central Bank Reduces Support

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Carry Trade Weakness

Like the Japanese yen, the Chinese yuan has been used to make carry trades -- borrowing in currencies with low interest rates and investing in those with higher rates. However, the recent weakness in the yuan has made this strategy less profitable.

Central Bank Intervention

The People's Bank of China has been intervening in the foreign exchange market to support the yuan. However, on Wednesday, the central bank pulled back its daily support to the lowest in a year. This suggests that the central bank is becoming less willing to prop up the currency.

Implications

The decline in the yuan's value could have a number of implications. It could make Chinese exports more competitive, but it could also lead to higher inflation in China. Additionally, it could put pressure on other emerging market currencies.