Chinese Yuan Devaluation — August 11, 2015
PBoC shock devaluation triggers global selloff
The PBoC devalued the yuan by 1.9% on August 11, with cumulative devaluation reaching 3.5% in three days. The S&P 500 fell over 11% from mid-August to its intraday low of 1,867 on August 25, entering correction territory. The index recovered most of the decline by early November.
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
A 3.5% currency move is modest. The market reaction was driven by fears that China's economy was far weaker than reported.
The August 24 flash crash saw the Dow fall 1,000 points at the open. Volatility-targeting strategies turned a correction into a liquidity crisis.
China's GDP slowed from 7.0% to 6.9% in 2015 — a deceleration, not a crisis.
Currency-policy surprises from major economies tend to be repriced as growth scares, and 2015's proved far smaller than feared — a modest devaluation, a mechanical selloff, recovery within a quarter. If China policy risk concerns you, size direct China and China-revenue exposure deliberately; selling US beta into a devaluation air pocket has historically meant selling the fear, not the fact.