The Chinese currency devaluation is now a crisis
After hard selling into Friday’s close in the U.S. and a global selloff in stocks today, it is clear that the Chinese mini-devaluation has begun a crisis, despite the Yuan appreciating for a seventh day. The mini-devaluation is merely a catalyst for a long overdue correction, But three questions remain. First, will the capital flows out of China force China to let the Yuan slip again? Second, will the downdraft in emerging market and commodity-heavy economies like Canada infect Europe and the United States? And, third will the US Federal Reserve resist rate hikes in the wake of the turmoil? My thoughts on those issues are below.