Wall Street was rocked yet again Thursday by news that China devalued its yuan for the third time in a row since Tuesday, bringing up the specter of Donald Trump's oft-repeated scenario – the trade war.
The yuan's central parity rate is now at 6.4010 yuan for one U.S. dollar, a drop of 1.11 percent from the previous day's 6.3306. Prior to that, on Tuesday, it had fallen nearly 2 percent of 6.2298 yuan per dollar – its lowest point in almost three years, and its biggest one-day fall since 1994.
According Newsmax, Donald Trump is on record as having expressed his concern about the impact of a weaker dollar, creating instability and inflation. In an interview with Fox News, he painted a dismal picture for the average American, given the state of affairs at Wall Street.
"A loaf of bread is going to cost $20 soon. A candy bar is going to cost $10. Look what's happening with oil – our lifeblood. It's going through the roof. That's a combination of China and OPEC, which is laughing at us."
Bloomberg reports that a 10 percent stock market correction becomes a strong possibility, which would in turn be followed by a full-blown stock market crash. Even worse, the yuan devaluation will bring about a stock market debacle on the scale of the 2007-2008 financial crisis.
Here's how the U.S. market behaved with each day the yuan was lowered. On Tuesday, August 11, the Dow Jones industrial average fell 212.33 points, or 1.2 percent, to 17,402.84. On Wednesday, the Dow Jones industrial average lost 0.33 points, less than 0.1 percent, to 17,402.51. On Thursday, the Dow Jones industrial average gained 5.74 or 0.03 percent to 17,408.25.
The fallout from the yuan's devaluation rippled out to China's neighbors. Malaysia's ringgit dropped 2 percent, ending up at 4.0375 to the dollar, its lowest since the Asian financial crisis in 1988. Indonesia's rupiah fell at 13,789 to the dollar. South Korea's won slumped 2.3 percent at 1,190.80 to the dollar. India's rupee dropped 1.6 percent at 64.89 to the dollar. The least affected were Japan and the Philippines with minimal depreciations.
Upon learning of the yuan devaluation Tuesday, G.O.P. presidential hopeful Donald Trump condemned the rotten implications of such a move by China on the United States. He gave CNBC his thoughts on the Wall Street dilemma.
"They're destroying us. They keep devaluing their currency until they get it right. They're doing a big cut in the yuan, and that's going to be devastating for us."
The yuan devaluation has Wall Street investors scrambling to preserve their capital in safe havens. There has been an increase in appetite for Treasury bonds, and the value of gold is on the rise.
[Photo by China Photos/Getty Images]